“Creative disruption” – that is a phenomenon that has been occurring in the global economy for several years. It is all about the sharing economy that changed the face of traditional business. According to a study by PwC the sales revenue in the five sectors, where the impact of the sharing economy was the most significant, reached 15 billion dollars in 2013. It is estimated that by 2025 they will increase to 335 billion dollars. What is about the sharing economy that has made us so crazy about it? Well, the basic factors include comfort, competitive prices and trends. However, the success of this type of businesses and their future development depends primarily on trust, built on the customer’s sense of security.
Grasping the term sharing economy within the definition frames is an impossible task, discussed on the scientific and business forum. It is accepted that the sharing economy is an evolving system of internet platforms which offers the exchange of goods and services. They are based on the entrepreneurial activities of users who provide temporary access to their resources to other individuals (peer-to-peer). The platform on which this takes place acts as a middleman. The sharing economy has seen tremendous growth and high adoption rates among different social groups, creating value on an unprecedented scale. Moreover, this new economy model is able to compete well with the relevant sectors of the traditional one. We can expect that the sharing economy will replace half of conventional business across multiple sectors by 2025 (PwC). The range of services and products is still expanding, including accommodation (Airbnb, HomeExchange), transport (Uber, JustPark, BlaBlaCar, Car2Go), retail (Peerby, Open Shed), fashion (Poshmark, Threadflip), entertainment and multimedia (Netflix, Spotify) and many more. Also, the three companies representing the sharing model are in the group of unicorns (start-ups valued at at least a billion dollars) – Uber, Airbnb, DiDi.
Trust is a superior value in every social relationship, including a number of factors that create a belief system and determine the actions of an individual. It is mainly based on the belief that someone or something can be entrusted with certain actions which will not lead to any unpleasant results. It may involve some risk and uncertainty but the expectation of reciprocity also. Sharing economy as an evolving entrepreneurial ecosystem based on peer-to-peer connections is based on the community-generated information oscillating around trust and reputation.
It is not so bold to say that the customer’s trust is the foundation of any business. In the case of the sharing economy it is even more important and relates to the basic value – the sense of security. Can we imagine sharing our apartment with a stranger or entrusting our car to someone we will never get acquainted with, without this value? Again, it is trust and reputation built on users’ credibility that determine the propensity to use the sharing economy. While the traditional economy is governed by relevant legislation and consumer protection law, guaranteed by state authorities, they are limited in the collaborative economy. Therefore it is necessary to consider what kind of methods can allow the sharing economy to create a customer’s sense of security and ensure the users’ safety and responsibility. The goodwill of the peer must be confirmed. First of all, it requires verification whether the person is who he claims to be and does not pose a threat to the peer who wants to use his services or goods. Identity verification seems to be the key to solving this issue.
It is worth considering how trust in the collaborative economy is shaped among different age groups. In the 18-34 age group only 14% of respondents indicate that they do not trust this type of services, in the 35-54 group the indicator increases to 33%, while among people aged over 55, 37% of respondents express lack of trust. Although the research was carried out in the USA, we may come to a general conclusion that the level of trust in the sharing economy decreases with age. At the same time, reaching this social group creates great opportunities for sharing platforms. As has already been emphasized it is a convenience that is the advantage of peer-to-peer economy. Certainly, this is a value appreciated by elders who due to certain health limitations and perhaps even the inability to deal with everyday matters, will be eager to use services that allow them to save time and money in a comfortable way. However, reaching this group requires efforts on trust building to convince them that the sharing platform is safe and the risk has been eliminated to minimum.
Is it only the eldest generation that has a problem with trusting new technologies and the sharing economy is the domain of young people for whom it is natural to use Uber or Airbnb? And therefore the future of the peer-to-peer economy shines bright? Nothing could be further from the truth. According to Pew Research only 19% of generation Y (Millennials) indicate that most people can be trusted. Therefore, social trust in this group may be described as dramatically low compared to generation X (31%) or baby boomers (40%). As has been previously outlined, trust is the fuel of any sharing platform. So what is the future for the sharing industry without deep risk analysis and exceptional care of trust building? One thing is certain – emphasis should be placed on the onboarding methods and implementation of a convincing verification process, such as those offered by Fully-Verified, not limited to authorization via email or selfie with identity document photo. Such methods will be insufficient for future generations that are aware of the threats on the Internet.
A common ground for threats connected to the peer-to-peer industry is insufficient users verification, a confirmation that they are who they say they are. Onboarding unverified customers can lead to a variety of fraudulent activities that go way beyond the traditional perceptions of identity theft. If the risks occur the customer’s trust may be broken and the company’s reputation may be damaged. It is necessary to remember that trust building is a long-term process, created by many indicators and at the same time a value that is difficult to rebuild. Every sharing platform should be armed with a trust management system which contains information security, identity verification and ongoing user authentication, in other words it should be based on KYC policy (Know Your Customer). Failure to do so may lead to following risks:
Sharing platforms usually use only email to verify new users which is not a sufficient method to confirm their identity. We should be exceptionally careful when online communication is the only tool to verify someone. It creates a significant risk for customers and companies from cybercriminals.
They can lead to a number of negative consequences for the user and create further risks. Account takeover allows access to sensitive personal data and thus the possibility of financial fraud, harm to user’s reputation and moral damages.
It is a deceitful activity which consists of creating a string of fake profiles to construct a fictional persona. Such an artificially created personality can later be used for financial fraud purposes.
They are defined as software that takes automatic actions on the Internet. Malicious bots can be used as a tool to disturb forums, increase website traffic and pose as a real person. The latter carries the greatest risk to user safety.
They undermine the reliability of the users or services which in turn reduces the credibility of the company.
They pose a risk to the physical, mental and financial security of a user in the real world. An unreliable onboarding and verification process may have disastrous consequences.
What happens when the above risks occur? Just like the boom of the sharing economy so is the boom in crimes by services and goods offered on these platforms. The events with the Getaround app may be a good example. The car rented via this app was used in a murder and several other cars were stolen. The apartment rented via Airbnb became the scene of a shooting which led to the death of five people and several others left injured. The already famous platform offering short-term rentals has also become the site of organized crime groups. They were setting up fake accounts and offers authenticated by fake reviews. As a result, guests were provided with premises with blocked drains, dirty linen ad floor and the reality which did not match the photos in the offer. Well, all of this creates a rather gloomy picture of a dreamy place to stay.
How does identity verification impact the level of trust among users of the peer-to-peer economy? There is a trend of a certain reluctance to transfer too much personal data. On the other hand, users want to be a part of a community of verified people, so they wish to be sure that other users are the people they claim to be. This transfers also into a sense of reviews reliability and lack of danger to physical safety and finances. The importance of identity verification extends beyond the process of onboarding. Customers also want to be ensured that the ongoing process of users’ monitoring takes place through periodic re-verifications. Identity verification is a remedy for customers’ sense of various threats and thus it builds trust in the sharing economy. Fully-Verified offers video verification services powered by technology and artificial intelligence. There are two options to choose from – Live-verify and Self-verify.
Knowledge-based authentication. This approach involves verifying users by asking them to confirm their answers to specific security questions that were created during the account set up process. It does not rely on any governmental credentials and can be easily detected by fraudsters.
SMS authentication. This method adds another layer of security by entering the code received via SMS. It usually requires the use of intermediaries which increases the risk. It is vulnerable to phishing, man-in-the-middle attacks and SIM swap.
Database solutions. It involves the use of the Internet, social media and behavioral patterns to validate online identity. This method may be easily tricked by fake profiles.
Credit history solutions. This approach is based on searching for the compliance of the data entered by the user with his credit history which is a reliable source of information. However, it allows only to check if the person exists and does not confirm if the user is who they say they are.
Online identity verification. This method uses a combination of artificial intelligence, biometrics and the presence of a verification specialist to establish the authenticity of the document and confirm that it belongs to the verified person.
The fast-developing sharing economy market requires improvement of verification and onboarding methods. Companies face the challenges of trust building in the conditions of demographics’ changes, threats in cyberspace and growing competition. What can give them an advantage today and ensure their existence on the market tomorrow is a properly implemented verification method. It is worth considering entrusting such competences to a specialized company, like Fully-Verified, based on qualified employees, technology and compliance regulations.