The Sharing Economy Must Become The Trust Economy

“…What ultimately keeps this economy spinning — and growing — is trust. It’s the elixir that enables us to feel reassured about staying in a stranger’s home or hitching a ride from someone we’ve never met.”

–PricewaterhouseCoopers, Consumer Intelligence Series: The Sharing Economy, April 2015

Just one year after the PWC study, TechCrunch declared:

“If you’re not working to build and demonstrate it, then the future might be about to leave you behind, as trust is quickly becoming the global — and most-valued — currency of modern time.”

This declaration rings especially true to me. As a venture capitalist during the hottest growth spurt of the sharing economy, I saw firsthand that trust is the biggest barrier to sustained growth. People want assurances that the platforms they use are safe. If unconvinced, new customers avoid joining and existing ones simply move to another platform.

The hard truth is that the vast majority of sharing economy platforms don’t know whether they’ve admitted high-risk participants or how to identify them. In many cases, they simply hope that transactions take place safely.

But people don’t gamble their personal safety on hope. In fact, research shows that 67% of consumer concerns about the sharing economy are trust related.

That’s the very challenge that brought me to Inflection, a company that’s spent the past 10 years working on solutions to address some of the toughest big-data problems of the internet age.

My mission: Help companies achieve safety at scale, without interrupting the signup experience or depressing conversion rates with long wait times.

Protecting Your Customers Protects Your Brand

Though peer-to-peer online transactions have been around for decades, the model has shifted dramatically. Back when eBay ruled the peer-to-peer landscape, transactions took place through a website and goods were shipped to the buyer without any face-to-face interaction. Seller reviews provided the main trust signals.

Today, companies like Angie’s List, Thumbtack, Airbnb, BuildZoom, and Turo help people connect with each other faster than ever. Interactions that start online or in an app rarely end there.

Reserving a room through an app eventually puts you face to face with a person you’ve never met who’s sharing their private property with you. Finding a general contractor online brings a stranger into your home. Buying a pre-loved item online leads to a face-to-face exchange. We all know the drill.

More and more, we also know the risks, because the darlings of the P2P economy make clickable headlines. While scary stories may not slow major players down at first, the impact of negative incident reports over time can tarnish even the biggest brands.

Worse, these incidents can mean actual harm to both providers and consumers.

The Challenge Of Trust At Scale

Under the harsh spotlight of traditional and social media, the “reputation cost” of safety compromises has soared. Yet few P2P companies take proactive steps to improve their trust and safety.

Every CEO I’ve met claims that reputation is the foundation of success, yet many companies still push liability to the users. Others try self-policing, reporting abuse on the platform, or highlighting best practices, such as encouraging people to meet in public places.

Ratings and reviews offer a partial solution, but they’re reactive by definition. By the time someone posts a bad review, a negative incident has already occurred.

Court records showing criminal convictions can help you proactively assess risk. In fact, this approach has proven useful for employers for years.

When combined with established privacy and nondiscrimination rules, such as the Fair Credit Reporting Act, background checks can surface convictions for serious crimes. This information can help companies make risk-assessments to protect their brand and reduce the risk of negative incidents.

As your business scales, so does its risk

The Technology of Trust

Today, background screening technology has advanced in ways that let companies make FCRA-compliant background checks of applicants’ criminal record histories as they sign up.

Automated, instant background checks use customer data and permissions to help companies quickly assess a person’s risk to your community or business at signup and over time.

Identity.com, the brand I lead at Inflection, offers one such solution: iD Background Checks. In fact, I believe it’s the only background check service that lets platforms screen new members fairly, without requiring a level of personal detail that would deter signups.

For example, one of our clients told us that asking for Social Security numbers (commonly required by background check vendors) depressed their conversion rates. Not all court records include SSN (and many don’t), so SSN didn’t seem essential to matching records to the right person.

Our team pioneered a way to combine the unique identifiers the company already collects at signup (such as legal name and birthday), with machine-learning algorithms and other big-data techniques to accurately match records to the right person. Only 1 in ~30,000 individuals report inaccuracies in their iD Background Check results.

That means, using information you already collect, you can get actionable results, including clear crime classifications and descriptions, that enable your team to make risk-reduction decisions without affecting your customer experience.

In short, if applicants to your platform have a criminal record for a serious offense that could jeopardize trust in your community, you’ll know within milliseconds — before you admit them.

This short video explains how it works.

Why Trust Must Include Fairness

The background check shouldn’t be the end of the process, though.

For one thing, peer-to-peer marketplaces and on-demand economy companies also face scrutiny from local, state, and federal agencies — and from plaintiffs’ attorneys. Although the legal landscape continues to shift, trends and expectations indicate that applying fair, FCRA-compliant information practices at the start can help companies stay ahead of the curve.

Typically, that includes notifying people that they’ll be screened, giving them the opportunity to correct errors, and notifying them of the ultimate decision.

These consent and notification steps play an important role in protecting the people applying for access to your services. And they also protect your brand from claims of unfair information practices and even discrimination.

Think about it. About seventy million people in the U.S. alone have some sort of criminal record. Simply screening out everyone with a record isn’t practical — that’s more than a quarter of the U.S. population. Many records are old or may not be relevant to participation in certain platforms. And, because minorities are overrepresented in that 70 million, such policies end up having a discriminatory effect.

Besides, technology isn’t perfect. No technology can make up for errors that exist in the original court records. And tech can’t (yet) address the fact that a criminal record is only one data point in the complete picture of a person’s trustworthiness.

That’s why P2P platforms that approach screening transparently — with fair information practices in mind — are ultimately protecting their own future. Notifying applicants of the screening and findings gives people the opportunity to dispute or correct inaccuracies.

iD Background Checks automates this process, called “Adverse Action”, which notifies applicants if something in their background check may cause them to be ineligible for your services.

The built-in process sends a copy of the background check (and all required legal documents) to any applicants whose results contain potentially disqualifying information. It also gives them an opportunity to dispute any incorrect information. If an applicant does file a dispute, we reinvestigate and let you know if there’s new information to consider.

Beyond Technology

Technology is a tool to start the process of assessing trust and safety. But respect for people — and their ability to correct and change — must be built in.

Background checks conducted transparently and with fair information practices at their core can help participants sign up for the on-demand economy and interact with confidence.

The opportunity for the convergence of technology and safety to enable peer-to-peer economy growth is significant. Consumers and companies both benefit when trust, safety, and fairness become priorities.

You don’t have to go it alone. The Identity.com team works side-by-side with the Trust & Safety teams at peer-to-peer platforms to fit their needs and to zero in on the key features that support trust at scale.

Learn more about iD Background Checks in this overview, or contact us for a free demo here.

About The Author

Annie Lin is the Vice President of Trust and Safety Solutions and leads the Identity.com business at Inflection. Before joining Inflection, Annie was a Vice President at Nokia Growth Partners, a global growth stage venture capital firm with over $1 billion assets under management, where she invested in and helped grow companies within the Marketplaces and Applied Big Data industries. Annie holds an MBA from The University of Chicago Booth School of Business and a bachelor’s degree from The University of California, Berkeley.