November 14, 2017
The Sharing Economy and The Internet of Trust
Posted January 30, 2017
Sure, it’s known as “The Sharing Economy.”
But for me, it really harkens back to the “Village Economy” of old—updated with digital age convenience, yet still dependent on something uniquely human: trust.
As a growing number of sharing economy companies are discovering, it’s also an economy that can be vulnerable to another human impulse—fraud. And many are learning it might take a village mentality to stop it.
What’s Yours is Mine
It’s pretty cool when you think about it. In a few easy clicks or taps, you can rent a ride, or borrow someone’s home, while enlisting someone to watch your dog while you’re away.
At a value of $18 billion today, and an estimated $411 billion by 2027, the sharing economy is going into hyper-drive.
And no wonder. In some ways, it represents the democratization of what once only royalty enjoyed: An army at your beck and call, ready to cater to your every whim. You can now have other people pay your rent, deliver your groceries, drive you around town, and more.
Yet, as anyone of a certain age might put it, what else is new?
Take my dad. He grew up in an actual village, where the sharing economy was as an age-old tradition. While cash played its part in transactions, the most valuable currency of all was trust.
Trust was why you got out of bed in the middle of the night to drive another villager to the airport. Trust was why you gave the fancy cookware to neighbors to use. And trust made the difference on the interest rate you might receive from the village lender, just as it does today.
But trust is easier to quantify when you know the person on the other end of the transaction.
Technology has made the Sharing Economy possible at a large scale. And most companies in the space don’t actually own the assets in play. The world’s largest taxi service doesn’t own a single cab. The world’s largest hotel chain doesn’t own a single property. Instead, their platforms enable willing users to connect and do business with willing providers.
As a result, digital trust is more important than ever. Especially as the ease and anonymity of these Internet-based businesses gain the attention of a growing number of fraudsters.
Wait, Wait, Don’t Trust Me
Despite meteoric growth, surveys find 39% of consumers still worry services provided through sharing economy companies can’t be trusted as much as those provided through traditional outlets. After all, can a part-time driver be as accountable as a licensed taxi company, for instance?
When you factor in fraud, things can get ugly fast.
Fraudsters rent out homes they don’t own by taking over legitimate accounts with stolen credentials, or by setting up all-new fraudulent accounts. They provide sham rides by opening up both user and provider accounts and then placing charges to a stolen credit card number. Or they borrow that sports car, never to return.
Today, data on fraud in the sharing economy can be hard to come by. But if it tracks overall trends, it’s rampant.
According to a study from Javelin Research, more than 13 million US consumers were victims of identity fraud in 2016, to the tune of $35,600 stolen every minute. Meanwhile, account takeovers have soared 113% in just the last year, and now account for 20% of all fraud losses.
That means digital trust—in those providing services, and in those requesting them—will become key to sharing economy companies hoping to attract, keep, and grow their user bases.
Share & Share Alike
So how will these players continue to provide the speed and convenience their users have come to expect, while simultaneously stopping digital trust-destroying fraud?
In 2017, look for a growing number of sharing economy companies to:
- Deploy new digital identity solutions to authenticate users. Not through new forms of credentials, but rather through real-time user profiling based on location, devices, usage and behavioral patterns.
- Leverage advanced analytics. Automated solutions will help identify suspicious activities when they fall outside of established norms, such as a single device opening up multiple accounts, or a user suddenly racking up huge bills.
- Start sharing – yes, sharing. Companies will realize building digital trust depends on access to shared, contextual data from one another and from outside sources. By using this data as part of a multi-layered approach to authenticating users, companies will aim to instantly identify fraudsters while keeping the user experience as friction-free as possible for everyone else.
The Ultimate Currency
Will these kinds of solutions succeed in helping to build an “Internet of Trust” around the sharing economy?
Time will tell, but there are promising developments. Just as the “yours is mine” dynamics of the village economy have gone high tech, so have its mechanisms for assessing reputation—the trust one has established in the overall community—now at global scale.
Just as in the villages of old, trust is the foundation of the sharing economy.
Just ask my dad.