The sharing economy has many benefits – from minimizing environmental effects to offering self-employment opportunities to developing business possibilities. However, this industry has some challenges, as well. In this blog post, we will discuss those challenges and discover how identity verification can help them. So let’s get started.
The sharing economy has brought significant changes in the way people do business and buy things/services. One of the primary reasons it is appealing to people is that it allows them to make money from little-used things, which is exceptionally important because we are all aware of the limited resources on the earth.
Besides this, the sharing economy opens up a lot of self-employment opportunities, embeds a sense of trust in the marketplace, and helps us reduce carbon footprint to a great extent.
While the sharing economy is a solution for many problems in society, it struggles with some challenges. Let’s discuss issues in the sharing economy industry and determine how identity verification can resolve them. However, before that, let’s get to know what exactly is the sharing economy.
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What is the Sharing Economy?
The sharing economy is a business model that is widely different from the traditional one. In this economic model, assets are shared directly by people through collaboration on the internet. All the communication between parties happens over the internet. The term “sharing economy” also goes by names such as the peer-to-peer economy, and the collaborative economy.
Some famous examples of companies involved in sharing economy include:
Airbnb is a community marketplace that allows people to list, search, and book accommodations across the globe using smartphones or tablets. The company enables individuals to monetize their extra space and promote it to a target audience worldwide.
Lyft is a popular ride-sharing network that connects drivers with passengers, requesting rides through Lyft’s smartphone app. Riders can pay for the service through the app.
It’s an online travel service that lets people search and book camping on farms, vineyards, and free sites. The service connects landowners with campers.
Turo is a peer-to-peer car-sharing marketplace that enables people to rent vehicles from local car owners. Riders can either pick up the car or ask the vehicle’s owner to deliver it to them.
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History of The Sharing Economy
The concept of the sharing economy didn’t arrive in a year or two – it’s an evolution that took years to reach the position it is today. And according to Forbes, the sharing economy is expected to reach $335 billion by 2025.
When eBay launched in 1995, the world saw a significant shift in how people buy merchandise and circulate them in the market. The company was one of the first facilitators of the sharing economy. They provided a worldwide online marketplace where anyone could buy or sell any product.
Although eBay is not viewed in the same light as other mainstream market sharing services like Turo, Airbnb, Lyft, it was the first to link buyers and sellers without any retailer in the middle.
With advancements in technologies, more and more companies started becoming part of this fantastic industry. Today, almost in every sector, there is a reputable name contributing to the sharing economy.
Problems in the Sharing Economy
Undoubtedly, the shared economy industry is bringing positive changes in consumers‘ lives. Today, millions of people are using services like Airbnb, Lyft, Fiverr – the list goes on. However, it does not mean there is nothing wrong with the industry.
Everything seemed a win-win situation for service providers and users in the sharing economy industry. Still, as the industry grew, some challenges started to appear. Some major ones include:
The trust issue is quite common in the shared economy marketplaces. Either you take the example of Airbnb or Lyft, service providers, and service recipients, both have to trust strangers. A driver needs to trust the passenger they are driving in and vice versa. Similarly, a traveler has to trust the landlord, providing them homestay.
So the trust gap is the biggest challenge that most companies struggle with. Though the idea of sharing services is becoming acceptable and comfortable for both parties, it will take some time to die down completely.
Since the sharing economy is entirely based on online communication, identification is another major challenge. Besides a few giant firms, most companies in the shared economy industry are not well-equipped to combat the growing risk of fraud.
According to a survey, 71.5% of sharing economy platform users verify their identities by providing their email ID only.
Nowadays, fraudsters are misusing shared economy platforms to target people and make frauds. Not only cyber attackers, but sometimes also the people behind the platforms might turn against the users. Therefore, it’s essential to have a proper identity verification solution in the shared economy industry.
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Identity Verification in The Sharing Economy Industry
Identity verification can play a significant role in minimizing most of the issues of the sharing economy industry. In the above section, we discussed that trust and safety are some significant concerns of people associated with the sharing economy. Well, with proper implementation of identity verification, these problems can be kept at bay.
Below are some benefits of utilizing identity verification for a sharing economy platform.
With a proper identity verification system in place, you can safeguard financial information and reduce the risk of frauds to a great extent. Using an advanced identity verification solution, you can rest assured that all the people joining your services are genuine and not involved in any illegal activities.
Identity verification helps you verify the identities of your clients/customers and give people the confidence to know who they are dealing with. With proper identity verification, service recipient, and service provider, both can trust each other easily.
Identity verification also helps you with growing your business. When you use an advanced identity verification solution to validate your users, you naturally improve the speed and efficiency of a digital onboarding.
KYC and AML Compliance
Identity verification is a crucial part of AML and KYC compliance. All the online businesses involved in financial transactions need to comply with KYC (Know Your Customer) and AML (Anti-money Laundering) directives. Identity verification helps you ensure that you comply with these directives.
If you’re searching for an advanced identity verification solution for your sharing economy platform, you can rely on iDenfy. Since our identity verification solution is powered by machine learning, it can automatically check facial biometrics. To know more about our services, you may book a meeting.