SHORT-HIRE BIKE GIANTS MOBIKE AND OFO have dismissed reports accusing the two of misappropriating the deposits riders pay to use their dockless, GPS-enabled Mobike and Ofo bikes. Thepaper.cn commented on Tuesday:

The misappropriation of users' deposits must be taken seriously, not least when many failed or financially struggling startups have done just that, even though it is illegal.

Unlike traditional deposits, those solicited from the bike users are not subject to the one-on-one rule. Rather than a deposit being paid for the use of one particular bike, it is paid for use of any bike owned by the service provider. In other words, one bike may be vouchsafed by deposits from more than one rider.

How the deposits are collected by the service providers has a lot to do with the industry's business model. In the realm of high-tech innovations, profitability used to be a top priority and a guarantee for continuous research and development. But that is no longer the case in the internet era when major technological breakthroughs are fueled primarily by the ability to attract venture capital.

That is why grabbing as much market share as possible becomes so important for such startups. The costly approach means fundraising tactics are not confined to courting deep-pocketed investors but include using customers' deposits.

The guidelines on short-term bike rental services issued four months ago by 10 departments at the central government level urge service providers to open special accounts in which to keep collected deposits. However, the guidelines are nonbinding.

There is little sign that the bike-sharing business will stop growing, and the two frontrunners Mobike and Ofo look set to seek further expansion with the endorsement of credible investors.

But it is not enough that users' deposits look safe in the hands of the two companies. The money has to be put under third-party supervision, for example, in the special bank accounts with strict suprervision.