The sharing economy is growing rapidly and is poised to impact numerous industries. According to PwC, the global sharing economy is projected to grow from $15 billion annually in 2014 to $335 billion annually by the year 2025. More than just ride-sharing apps or vacation rental sites like Uber and Airbnb, the sharing economy is transforming numerous vertical industries. For example, peer-to-peer (P2P) lending platforms like Lending Club and Prosper are disrupting the financial services industry. Lending Club alone has facilitated more than $16 billion in loans since its inception. In the retail industry, sharing economy sites like Rent the Runway, Le Tote and Poshmark are positioned to have a significant impact as consumers increasingly choose to rent or trade clothing rather than purchase new.
An essential element that has helped propel the growth of all these different types of sharing economy services is trust. Because consumers, understandably, can be wary about conducting transactions with strangers, sharing economy companies have learned that the key to consumer acceptance – and therefore business growth – is the ability to create trust and give users the assurance that they know who they’re transacting with. Likewise, businesses operating in any industry can apply the lessons learned in the sharing economy to help propel their own growth in an age when consumers are increasingly conducting all their day-to-day transactions through digital channels.
How Trust Leads to Business Growth
Sharing economy companies have learned that verified user identities are the cornerstone to creating trust in digital environments. For consumers to be willing to use sharing economy services, they must feel confident that the individual on the other end of that transaction is not only a real person, but also a trustworthy one. Indeed, in a survey of 2,000 consumers from the U.S. and UK, 61 percent said they will not trust other parties in a peer-to-peer transaction without checking identity first. A full 79 percent say they would be much more likely to trust a stranger online if they had assurance of identity. Verified identities create trust and give users the confidence of knowing who they’re dealing with. Ultimately, this trust contributes to business growth by attracting new users who would otherwise not be willing to participate in the sharing economy or other types of digital transactions.
Verified identities also help businesses in other ways, including by reducing fraud and helping protect brand reputation. For example, in the financial services industry the vast majority of fraud takes place in digital channels and is perpetrated by people using stolen or synthetic identities. Since the U.S. switched to EMV-enabled chip payment cards in 2015, online fraud has increased dramatically. According to Javelin Strategy & Research, new account opening fraud jumped 113 percent in 2015 and card-not-present fraud increased 40 percent in 2016. With these trends continuing unabated, it becomes clear that strong identity verification is an essential tool for helping companies keep fraudulent activity at bay when enrolling new users or processing high-value transactions through digital channels.
Equally important to fighting fraud is the need for businesses to protect their brand reputation. In today’s world, if a consumer has a negative experience with a business they can immediately take to social media to voice their grievances. As a result, a company’s reputation can quickly spiral out of control, causing damage to customer sentiment and future sales. In the case of the sharing economy, there have been several examples in the news of people using fake identities or posing as someone they’re not in order to defraud other users of these services. Companies such as Uber and Airbnb have faced an onslaught of bad press lately related to identity verification issues. This negative news coverage harms growth by making existing customers less likely to continue using the service and deterring potential new users from joining. Sites like Airbnb and Uber have begun strengthening their identity verification processes and background checks in order to stave off fraudsters and give their users peace of mind. Likewise, businesses operating in other industries, such as travel, online marketplaces, job search/hiring sites, dating sites and many others, can learn from these lessons and use verified identities to reduce the risk of situations occurring that can result in bad reviews and damage to brand reputation.
Trust, but Verify
New mobile technologies make it possible to easily and securely verify user identities in digital channels without sacrificing the speed and convenience that consumers today expect. For example, companies can strengthen the “front door” and help prevent new account opening fraud by verifying users’ identities during enrollment. A new user simply leverages their smartphone’s camera to scan their government-issued ID. Digital identity verification technologies with advanced computer vision scan for security features and instantly determine the authenticity of the ID and whether it has been tampered with. For additional assurance, companies can also have the user take a selfie, then leverage facial comparison technology to compare the selfie with the photo on the ID, to confirm that the individual enrolling is, in fact, the person pictured on the ID.
Businesses can also leverage digital identity verification technologies with built-in NFC capabilities to have a new user simply tap their smartphone to the RFID chip in their e-passport for a fast, easy and secure identity verification check. These types of e-passports are becoming increasingly popular, with more than 3.6 billion people expected to have them by 2021. And, because government-issued IDs and passports are difficult to obtain, they are increasingly being considered the preferred root credential for digital identity verification.
Additional mobile technologies that can be used to further build verified identity profiles for your users can include device ID, biometrics such as fingerprints, and even behavioral analytics. All of these technologies can be leveraged with the smartphone that users already have in their possession, and because consumers are already familiar with snapping selfies and scanning their fingerprints, using such techniques for identity verification will not cause friction or harm the user experience.
Verified identities are a key building block to establishing trust, not only in P2P transactions, but in any transaction taking place in the digital channel. Businesses should learn from the lessons of the sharing economy and adopt more robust identity verification methods during enrollment and as users conduct high-value or high-risk transactions. By doing so, they can create the necessary trust among their customers and userbase that will lead to further business growth while also mitigating the risk of fraud and protecting their brand reputation.