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Bike-sharing company Ofo ends tie-up with Alibaba's Sesame Credit

Ofo bikes Photo: Reuters

China's bike-sharing company Ofo has ended its cooperation with Alibaba-backed Sesame Credit, signaling its intention to operate independently in order not to follow in the footsteps of Mobike, which was bought by Meituan-Dianping in April, the country's largest provider of on-demand services ranging from food delivery to ride hailing.

The move strikes a sharp contrast to many Chinese bike-sharing companies which depend on Sesame Credit, a social credit evaluation system developed by Chinese e-commerce giant Alibaba Group's financial affiliate Ant Financial, to offer deposit-free rental services to users who hold good Sesame Credit points.

Since the end of May, Ofo has cancelled the Sesame Credit-enabled deposit-free policy in 25 Chinese cities including Shanghai, Guangzhou and Shenzhen, and instead, the company said that it will establish its own algorithm-based credit scoring system in a baby step that could guarantee its independence from bigger investors. The suspension of the cooperation with Ant Financial coincided with Ofo's rejection of the acquisition bid made by Alibaba and the country's leading ride-hailing company Didi Chuxing.

In March 2017, Ofo started the collaboration with Sesame Credit, allowing users who hold a Sesame Credit score of 650 or higher to rent a shared bike without paying deposit. The cooperation lasted for 14 months till May this year, when the bike-sharing firm had reportedly aimed to become profitable after years of money-burning policy aimed at grasping market share.

Yu Xin, co-founder of Ofo, said that a self-developed credit scoring system which is compatible with Ofo's operations is needed after the company stopped working with a third-party platform [referring to Sesame Credit].

The new credit scoring system will include the old credit scores, and will design a black list in partnership with the local governments of users who break the traffic rules.

At the same time, Mobike and Alibaba-backed Hellobike are expanding their deposit-free rental services with the support of the Sesame Credit system, which some analysts say could lead to wider use of Alibaba's mobile payment tool Alipay, through which shared bike users can verify their credit scores.

Since last year, numerous bike-sharing startups went bankrupt due to capital chain rupture and reckless fundraising. Besides the three largest bike-sharing companies [Ofo, Mobike and Hellobike], Bluegogo, which had declared bankruptcy, made a comeback earlier this year by connecting its service to the platform of Didi, which is committed to building a comprehensive network for intelligent travel. The sale of Mobike to Meituan-Dianping and the integration of Bluegogo into the Didi platform apparently sends a message that the bike-sharing companies could not live without support of bigger players.

However, Ofo is taking pains to turn the scale.

Last week, the Beijing-based company was reported to test a brand new price computation instrument in some cities, which triggered speculation about a price hike.

In response, Ofo said that the test will lead to a more reasonable charging system pegged with ride time, which will be beneficial to users, some of whom might enjoy a ride by just paying less than one yuan. Ofo has not revealed where the test was conducted, saying that the new charging system will be released on its app once the test completes.

But some industry insiders consider it as a disguised price hike, which would make it difficult for Ofo to survive the fierce competition with Mobike and Hellobike.

The test for the new charging system came right after domestic media reports said that Ofo was facing cash crunch and thus embezzled users' deposits to offset the cash flow gap. But the reports were denied by Ofo, which said that it had achieved profitability in some 100 Chinese cities.

Recently, mydrivers.com, a Chinese technology news provider, exposed photos of Ofo holding an internal strategic meeting in Zunyi, a city in southern China's Guizhou province, where a new strategy called 'Ofo Consumer" was released, which the company is pinning high hopes on to achieve a healthy balance sheet in 2018 in all the Chinese cities where it has presence.

In the first half of 2018, Ofo reduced its operating cost by 80 percent, contributing to a bigger revenue in the first quarter of this year, which surpassed the total revenue of 2017, said the company in the strategic meeting, according to the mydrivers.com report.
 


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