The shared economy business model has been with us for many years now, with the likes of Airbnb and Uber being the largest examples of how successful and disruptive these business models can become. While their journeys, and others like them, have been impressive, the road has not been without its twists and turns. The effects of fraud, theft, and damage to goods and property, perpetrated by strangers with an unverified user account or identity, can have serious impacts to the business and individuals within their ecosystem. With identity fraud at record highs, reaching 16.7 million cases in the US alone according to recent numbers from Javelin strategy, shared economy businesses that fail to establish methods to verify the identity of their users could face challenges of their own.
Trust & Customer confidence
Trust is hard to build but easy to break, and is the cornerstone of shared economy marketplaces. Many traditional businesses are obsessive about creating a trusted product, service or brand, however, this is intrinsically more challenging in the shared economy as companies reply on unknown third parties to deliver on the promise printed on their shop window. Conventional business would balk at the idea of an unvetted person or supplier representing their brand, yet this is precisely the dynamic for many shared economy businesses without identity verification measures in place.
Ratings and reviews are a step in the right direction towards building trust, but with the rise of chatbots and fake reviews these risk being as questionable as the underlying unidentified user. While some would argue that businesses cannot be held responsible for all fraudulent activity on their platforms, those that distance themselves from these failures without taking a degree of ownership, or pass the risk on to their customers with the caveat, “We cannot confirm each members identity”, are taking the easy road and will ultimately pay the price as customers favor more trusted platforms. In fact, a recent report by Experian showed that 66% of surveyed consumers actually like security protocols when they interact online as it makes them feel protected. Just as brick and mortar business introduce more services and customer protection to win the retail battle, the shared economy will be vying for loyalty by putting the needs of the customer first. Trust is a key battle ground.
Fraud, not frequent but costly
One of the key strengths of the shared economy business model is its ability to generate value, to both customer and business, at a relatively low cost. Whether it be by sweating an owned asset or utilizing idle assets of third parties, capital is used very effectively. If efficiency is the name of the game, fraud costs are the outlier. It may not happen frequently, but when it does it can become a very costly affair. Elaborate scams by fraudsters who are emboldened by the cloak of online anonymity can very quickly siphon vast amounts of value from the business or members through deceit, damage or theft. Companies who support the victims of fraud take on this financial burden or pay the price in insurance premiums. Those who don’t have lost a community member and this source of value, further to reputational damage. Either way, if the business becomes notorious for its lack of security or oversight, it risks becoming a honeypot for online criminals, accelerating the problem.
Digital Identity Verification: The trust enabler
Thankfully, with new emerging technologies it often doesn’t take much to deter fraud and the costs associated with it. Simple digital identity verification solutions are available which are fast, secure, and non-intrusive. By simply scanning ID documents and comparing a video selfie from the user, the authenticity of ID documents, and whether they belong to the person submitting them, can be verified instantly. Knowing that this is a requirement is often enough to prevent fraudsters from entering the ecosystem – commit a crime with your ID and face in full view? Those who are not deterred and try to enter with forged or stolen documents still need to pass the gauntlet of trained identity verification tech, complete with advanced fraud capture capabilities such as liveness detection, the ability to detect whether the video selfie was recorded by a live person versus a recording, or whether a person is holding up a still image or wearing a mask. Simple yet powerful identity verification services such as Daego by PXL Vision not only reduce the instances of fraud and the costs related to them, but are available as cost effective SaaS products which make implementation and ongoing operation compatible to the lean, green business model of the shared economy.