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Identity technology in the sharing economy

Arguably, the sharing economy may have shrunk our ‘small worlds’ even further. We can now easily book ourselves a stay in the home of ‘trustworthy’ strangers, pick up someone else’s ‘off-the-road’ car to do our weekly grocery shopping, or find someone to pick up our dry-cleaning – all merely a few swipes away.

The only seemingly missing piece – thus far – has been our ability to transact across borders without incurring eye-watering currency conversion and international transfer fees. That also may now be changing, with Facebook announcing the launch of its new digital currency, the Libra, spanning countries and continents. Already dubbed ‘a Bitcoin killer’, it will be pegged to a basket of major currencies, designed to handle large volumes of transactions. The idea sounds promising from the start – already being backed by a consortium of 28 big firms. If Facebook’s 2.4bn users adopt Libra as their digital currency of choice to transact and shop, it could genuinely become one of the world’s globally accepted currencies, disrupting the financial system as we know it today, helping to boost social mobility and even potentially alleviate world poverty.

Not so fast. With reports of fake news and fake profiles online not slowing down anytime soon, verifying digital identities is a must to ensure safety and security when transacting in Libra. The notion is applicable to all e-commerce and sharing economy innovations that we can no longer imagine our lives without. While there are still more questions than answers when it comes to the new digital currency – one thing is certain: it will have to comply with stringent Anti-Money Laundering Directives (AML4/AML5) and PSD2, requiring anyone making a payment larger than the ‘contactless’ limit to double-authenticate themselves.

The cure for the sharing economy’s identity crisis

As well as providing unparalleled levels of freedom, the sharing economy and e-commerce are going some way to enhancing social mobility. The IPOs of ride-sharing companies like Lyft and Uber are a testament to the sharing economy being officially a global mainstay. While some may argue that their market valuations look inflated for asset-light entities, investors seem certain. They are clearly banking on steady growth and rising profitability of both ride-hailing firms.

There are an estimated 1.4 million Lyft drivers and three million Uber drivers worldwide. Meanwhile, Airbnb has an inventory of four million properties in 65,000 cities and 191 countries across the world. All three are testaments to the stunning growth in the sharing economy. Yet, the sheer scale of these platforms lays bare the difficulties associated with confirming the identity of everyone who accesses or provides services.

Being in the limelight for a while, these companies also highlight one of the biggest problems with the sharing economy, which is that of trust. Both buyers and sellers depend on knowing precisely who they are dealing with. Consumers have the right to be comfortable in the knowledge that they can instantly ‘trust’ a stranger with their own and their family’s safety. And the sharing economy platforms have the duty of care towards their users to provide a safe and fair marketplace for all.

Where platforms like Airbnb or Vrbo are concerned – the homeowners need to be reassured that they’re renting to legitimate people, and that any damages would be covered if things go wrong. For holidaymakers, it’s crucial to know exactly whose home you’re staying in, so having their identity and credentials verified is significant. Luckily, identity verification technology comes to the rescue – which Airbnb is now successfully deploying to enhance user experience – increasing the level of trust between all sharing economy users. Sometimes, virtually overnight.

Sharing is ‘caring’.. or ‘carrying out verification checks’? 

Sharing is based on trust, and the present difficulty of establishing who someone says they are could to become the industry’s Achilles’ heel, slowing down expansion. The difference between waiting for reviews to come through to verify someone’s identity and trustworthiness and being instantly credible as a government-issued ID is digitally verified, will be huge. This will no doubt increase the appeal of transactions on sharing economy platforms. And, from the perspective of the sharing economy companies themselves, this move will send a strong signal that they genuinely care about their users, and that they are there to provide truly safe online spaces.

Car sharing platforms are just one example where digital identity verification can be both an opportunity and a challenge. In addition to such well-known companies as Uber and Lyft, there are also players that provide a marketplace for those would-be drivers who want to rent cars for use as peer-to-peer ridesharing. These car sharing platforms usually rely on purely digital users and can face issues in on-boarding, as well as reducing fraud and keeping track of those actually using their cars for insurance purposes.

It is paramount for these companies to ensure that their drivers always assume their responsibilities in case of car accidents, customer complaints and other potential road-side issues. This is where digital identity verification helps drive social mobility – quite literally. All that is required for would-be drivers is to take a photo of their government ID and a selfie. Then, their identity can be verified in near-real-time with the help of their smartphone. The solution is not only bound to  support the rise in overall annual car rentals and peer-to-peer sharing volumes – but it is also designed to build trust around ride-sharing applications and the entire ecosystem around the likes of Uber and Lyft, propelling the sharing economy even further forward.

The sharing economy can continue to revolutionise our lives and give us all access to more resources, exactly when we need them – affordably priced and available instantly. However, in order to further evolve and grow, the marketplace needs to solve the challenge of establishing trust.

As with so many things today, the answer lies in our pockets: it’s our mobile devices. And as we hear about password and identity leaks and hacks, we can be secure in the notion that our ID documents can be changed if stolen, lost or compromised – as opposed to our biometric data or social security numbers. Which, by extension, lends more ‘protective’ options to our ‘digital identity’, too. If we can combine confidence and convenience through simple, intuitive and secure digital ID verification, then the sharing economy can truly live up to its promise of changing our world for the better. This could even go so far as driving social mobility upward for those craving to be modern citizens of the world – without too many, if any, dangers ‘attached’.

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René Hendrikse

René Hendrikse

Vice President & Managing Director, EMEA & LATAM

Mitek

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23 Jul

Location

Amsterdam

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This post is from a series of posts in the group:

Biometrics

Biometrics are the new weapons of war against online fraud and supporting financial services with biometric authentication and their KYC (Know Your Customer) procedures. ​ There are many different areas where biometrics are being deployed. For example in digital identity; an alternative to user names and passwords; protecting against ID theft; account takeovers and multiple accounts. ​ Mobile biometric authentication is helping to verify new and returning customers at the point of log-ins, payments and digital on-boarding.


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