Hellobike to offer deposit-free policy to millions to secure market confidence

Hellobike, a rising player in the fierce Chinese bike-sharing battle, has teamed up with Alibaba-backed Sesame Credit to offer users who have personal credit scores of 650 or more a deposit-free bike-sharing service throughout China. The company said in a press conference in Beijing on March 13. It is the first Chinese bike-sharing startup to introduce such a policy to so many users instead of testing their service in a limited regional trial. Its rivals, Mobike and ofo, only allowed deposit-free services in a few cities at first.

With this new strategy, Hellobike aims to save a USD 5 billion deposit for 160 million users across the country. It is a strategic move for Hellobike, which is looking to expand after many bike-sharing startups went bankrupt and lost the deposits of millions of users.

Yang Lei, the founder of Hellobike

Hellobike introduced the deposit-free policy in 20 cities since last November, and it provided deposit-free services to college students and others in another trial. The startup said the 20-city trail attracted over 15 million users and USD 500 million in deposit was saved.

According to the data from the China Internet Network Information Center (CNNIC), by the end of December 2017, there were more than 220 million users in China’s bike-sharing market. Generally, they are required to pay a deposit ranging from RMB 99 to RMB 299 for the bike-sharing services, which accounts for billions of USD in funding for bike-sharing companies.

From the second half of 2017, some bike-sharing startups faced financial troubles, which caused problems for users who wanted to retrieve their deposits. According to the official data, users lost about USD 240 million in bike-sharing deposits due to the fact that many bike-sharing enterprises stopped operating. More than 5 million users lost their deposits.

Because of this, Hellobike has teamed up with Sesame Credit to replace the deposit with personal credit. Hellobike said that it reduces the risk of losing deposits for users, but that users would face trouble if they did not uphold their good credit. And all the data will be recorded. The deposit-free service will be a smart move for Hellobike, since it satisfies users who would rather use credit than cash for their deposits.

One prominent backer of Hellobike is Alibaba online payment arm Ant Financial, which supported Hellobike’s merger with rival Youon last October. Ant Financial contributed to Hellobike’s USD 350 million Series D1 and its USD 152 million Series D2  financing rounds.

Also on March 13th, bike-sharing giant ofo announced a new USD 866 million funding round led by Alibaba Group, which presents the highest funding record in the bike-sharing industry and marks a new era for operational efficiency of the bike-sharing system. Besides, the ride-hailing giant Didi Chuxing also announced its intention to launch bike-sharing brand Qingjudanche deposit-free in five cities later this month.

The transportation industry continues to be popular with investors and related enterprises, since they are in-demand services. The bike-sharing battle in China will no longer be just a battle of capital, but also a battle between technology, big data and other resources.

The bike-sharing market competition will be cutthroat as various rivals vie for market share. However, the companies are working to figure out which bike-sharing and sharing economy business models are the most profitable, since per-transaction values continue to be low.

(Top photo from Hellobike)

Kaikai Shi
Kaikai Shi

Kaikai Shi runs the Tech Financing columns for us. He holds a bachelor's degree in Biotechnology at Zhejiang University. His interests are in new technology and reading. Kai believes that new technology will change the world we live in, and is trying to engage himself in this process. Write to him: kai[at]alltechasia.com

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