Trust is holding back online peer-to-peer transactions in the sharing economy and in online marketplaces such as buying second-hand goods online or renting a holiday property, but the fast growth of some of the best-known companies in the sector is masking the fact that mainstream use is being held back. We know the growth is there, eBay for example has over 158 million active buyers and 800 million listings worldwide. To date, Airbnb has facilitated 10 million nights of accommodation and BlaBla Car motors 40 million passengers and drivers a year.
The early adopters have taken to these new ways of doing things in droves -- there is a reason that AliBaba and Uber have become household names in such a small amount of time. No longer do you have to rent specialist holiday homes from a travel agent; these days you don’t have to call a cab and the days of the car boot sale are numbered. The evidence suggests that these innovative behaviours of share and share alike are on the rise, thanks to peer-to-peer exchange sites becoming more common enabling us to transact and share with people we would never had known otherwise.
The benefits of the sharing economy are many from cash generation (selling your unwanted items) to environmental benefits (carpooling); however, the increase in these transactions means that as a society we are transacting both financially and otherwise with people we simply don’t know; this is causing potential sharers pause for thought and not without good reason.
Do you know who you're dealing with?
We recently launched HooYu as an identity confirmation platform designed for the sharing economy so that businesses and people alike can confirm the identity of a person they are transacting with. In our Trust & Identity Report, we found that only 25 per cent of people have used online auction marketplaces and only 15 er cent of people have used sites to rent a holiday property. Only 8 per cent of people would be happy to transact online with somebody they didn’t know without trust and confidence in that person’s identity. There are perfectly logical reasons for this, as platforms like these provide fertile hunting grounds for online scammers.
Fraud is not a new concept, especially in the online world. There are two truths about fraudsters and scammers though: they look for the path of least resistance, and they are as organised and technologically savvy as the largest of businesses (often more so).
What you should look out for in the sharing economy
'Holiday Fakers' (how fraudsters target consumers)
In the holiday rentals sector, there are stories abound of fake property owners. They post a property for rent and in their profile on the marketplace add text to say to email them if they don’t respond quickly via the platform’s own messaging system. The unwitting holidaymaker who wants to bag that property at that low advertised price follows up by email and at that point, the fraudster has taken the holiday maker out-of-bounds of the safety of the platform. Then they encourage the holidaymaker to pay via a bank transfer instead of the platform’s payment mechanism. The holidaymaker has unwittingly paid for a non-existent booking on that holiday rentals platform.
The 'Ride a Launder' (how fraudsters use platforms to conduct criminal activity)
In the ride sharing sector, fraudsters use ride sharing platforms to launder money. A fraudster creates two accounts, one using compromised identity and card details and another with a fake identity that they control. They then pay for a rideshare (that never actually takes place) and via the rideshare platform move money from the compromised card to another financial instrument that they control.
The '(Permanent) Car Share'
The sharing of high value luxury cars is at the glamorous end of the sharing economy but is also a major target for fraudsters. Using stolen identity details, fraudsters can circumnavigate the security measures in place on a platform and then use a stolen credit card to pay the fees for ‘sharing’ the car. Once the car is picked up, and then never returned, the fraudster has got away with often a six-figure car -- leaving nothing but fake details behind.
I firmly believe just because there is a potential fraud threat, doesn't mean that we shouldn’t progress. Technology should be for the benefit of society and the sharing economy especially is to be encouraged. It is important to remember that the sharing economy is in its relative infancy and needs to learn from it predecessors, such as e-commerce and online gaming. Here are my top tips on how sharing economy businesses can keep fraudsters at bay and encourage growth…
Five ways the sharing economy can improve trust
1. Offer a well-lit marketplace by verifying your sharers -- it will return dividends in terms of attracting new customers to register and transact and keeping fraud out.
2. Lose the caveat emptor approach. Sharing economy platforms need to stop passing the risk to consumers when it comes to the identity of their users. Statements such as 'We cannot and do not confirm each member’s identity' or 'User verification on the Internet is difficult' are frequently buried in the T&Cs on sharing economy sites -- leaving the unsuspecting consumer unknowingly at risk.
3. Don’t just use social sign-in as your verification mechanism. Social sign-in just gives you some identity information about the customer, it doesn’t verify the identity of the customer. Platforms need to examine and cross reference the data that they are receiving. HooYu’s approach uses multiple sources of information to confirm and corroborate an identity.
4. Enable your customers – the focus is on the individual in the sharing economy as they are the ones sharing. Enabling them to put fears aside by giving them additional tools to verify who they are dealing with makes a sharing economy platform much more attractive, offering not just a unique service but also peace of mind.
5. Go beyond identity. Identity is just one component of trust. If somebody is using their own identity, then you can more safely assume that they will evidence good behaviour. However, competence and intention are also parts of trust and confidence which must be built through mechanisms, such as ratings and reviews.
David Pope, identity and fraud prevention specialist, and Marketing Director at HooYu