Lyft launched Lyft Cash Rewards in October, a program where riders earn up to 5% back on their rides (Lyft). The catch is you need to preload money into your Lyft Cash wallet through an auto-reload system. There are three tiers: reload $25 and get 2% back, reload $50 and get 4% back plus some perks like relaxed cancellation fees, or reload $100 and get 5% back plus free XL upgrades and cancellation benefits.
From an embedded finance perspective, this is Lyft building a closed-loop stored value account into their app. Users preload money that sits in their Lyft wallet until they spend it on rides. The rewards structure gives them cashback as an incentive to keep that money locked in the platform. For Lyft, the benefits are pretty clear. They get to hold customer funds that don't earn interest, which improves their cash position. More importantly, having money already sitting in the wallet increases retention because users are more likely to stick with Lyft when they have a balance to spend. It's basically a prepaid wallet disguised as a loyalty program, or maybe a loyalty program that requires a prepaid wallet to work. Either way, the financial product is doing the heavy lifting for customer stickiness.
What's interesting here is that Uber launched Uber Cash years ago and it's been pretty successful for them (Uber). It's actually surprising it took Lyft this long to launch something similar. They're clearly playing catch up on the embedded finance side, which makes you wonder if they were skeptical about the model or just slower to prioritize it. The rollout is also pretty limited right now, starting with their most loyal long-term riders in San Francisco before expanding nationally.
PS: If you are interested in such wallet use-cases, have a look at our podcast episode 24 where I speak with Arda Cagaptay about the trend of merchant wallets 2.0.
