Weird that it's allowed; here in The Netherlands, it's forbidden to have any kind of light in or on your car that's not defined by the standard (e.g. 2 headlights, turn indicators, break lights, etc.).
I don't get why they didn't just do the reverse – have the user's phone screen switch to a random color and tell them when to hold it up so their driver can identify them on the street. You'd still have to do the secondary confirmation with names like you do now, but in terms of just finding the rider it'd be much easier for the driver.
I'd suppose it's a safety issue. I wouldn't want to draw attention to the fact that this person has no idea which car they're supposed to get get in.