When it comes to the sharing economy, ratings and reciprocal reviews have long been considered fundamental to building trust between parties. While important, I would rather argue that the true drivers of the sharing economy model in the future are simplified and unobtrusive ways of identification along with reliable and tailored ways to make payments build trust amongst all parties involved and allow this revolutionary socio-economic ecosystem to reach its full potential.
Disrupting established industries
Since its mainstream advent, following the financial crisis, the sharing economy model has bucked scepticism and is on the verge of proving its viability.
Authors Rachel Botsman and Roo Rogers estimate in their book What’s Mine is Yours: The Rise of Collaborative Consumption that the size of the total sharing economy is, at least, worth USD 110 billion. The acceleration of this form of exchange is not expected to slow down any time soon; a recently published report from PwC estimates the sharing economy to be valued at USD 335 billion in 2025. It is obvious that the collaborative consumption model has disrupted established industries ranging from transportation, hospitality, retail and entertainment and shows no sign of abating.
So what has caused this massive growth? At its core, developments in internet coverage and usability, along with social media, has revolutionised the way we shop and interact with others. Fostering these developments, online marketplaces and platforms have managed to unlock whole sectors of individuals creating communities of micro-entrepreneurs who are then kept from misusing the platforms through user reviews and rating systems.
Since the very first sharing economy platforms, such as eBay, were established, the system of community checks and balances has kept things moving forward. Both customers and sellers need to feel comfortable with all aspects of the engagement; customers want to feel secure that the service they are getting matches their expectations while the seller needs to know not only that they will be paid, but also that their interests are secure.
That is where the platforms and marketplace owners come in; it is their role to make the market as effective as possible. In order for them to succeed, however, there is a real need to facilitate the creation of trust not only between peers, but also between participants and the platforms in the sharing economy without adding complexity. There has been an overreliance on the community to manage itself and community led reputation can only take the system so far.
Issues with reputation based platforms
An issue with reputation is that reputation is very subjective because preferences are subjective. There are other challenges associated with an overreliance on reviews, as well. AirBnB and other sharing economy pioneers have, for example, grappled with problems of review inflation and review retaliation. That is why, in my opinion, reputation can be a complement to, but does not replace identity verification.
The problem is that identity verification often adds complexity to the user experience. However, most marketplace owners do not want to burden private users with long registration or verification processes before they actually become active. Likewise, marketplace owners do not want to expend valuable resources performing background checks and other administrative tasks to identify individuals using the service. While many players in the market implement screening procedures, they are usually cumbersome and risky. Moreover, it is not efficient for customers to upload passport copies or other identity documentation on several platforms.
PwC points this out in a report in its Consumer Intelligence Series on the sharing economy. They say For the sharing economy to continue to expand, the players within it will need to find ways to authenticate the identity of consumers… In a peer-to-peer model, not everyone has government verified documents or social media profiles that can sometimes suffice instead. Identifying, and upholding, quality and trust metrics will be critical to success in this evolving model.
A balanced and simple solution
What if there was an unobtrusive solution that was highly objective and which verified consumers’ identity with a high degree of confidence, but did not require users to complete additional steps and could be completed at the time of the transaction?
This is precisely what Trustly does. Our service was built as a complement to existing bank infrastructure and banks do a good job in verifying user identity. Leveraging online banking identification is one of the simplest and safest ways to verify who you are. Trustly removes the need for sensitive documents or payment information to be stored on various different platforms altogether. At the same time, Trustly is a payment facilitator. The customer both verifies their identity and pays in a single process.
While it is fantastic that successful platforms have been established in recent years, and the more people use them, the more encouraged they will be to try new offerings, ultimately the way parties are identified in any transaction or service relationship, as well as how payments are made, will be fundamental to the industry’s growth.
Trustly helps you monetise your marketplace simply and build trust in your community.
About Catrine Rhenberg
Catrine Rhenberg is Head of Marketplaces at Trustly Group. She joined the company in 2014 from iZettle, where she was Commercial Manager, supporting their international expansion. Catrine holds a B.Sc. in Economics with Economic History from the London School of Economics.
About Trustly
Founded in 2008, Trustly Group AB is a Swedish FinTech company providing speedy, simple and safe online payment solutions. In 2014, Trustly was ranked amongst Swedens fastest growing technology companies on the Deloitte Technology Fast 50 list. Trustly is a licensed Payment Institution under the supervision of the Swedish FSA.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now