Sharing economy companies have found it particularly challenging to get customers’ attention since the pandemic began, as the health crisis has reduced the number of consumers who are commuting to work, booking vacations and international travel or participating in other key industry segments. Homesharing platform Airbnb, in one instance, reportedly lost 80 percent of its business within the first six weeks of the pandemic, according to statements from the company’s CEO. Sharing economy businesses worked hard to differentiate themselves from their competitors even before the global health crisis added new challenges, with certain ridesharing platforms introducing food delivery services to keep customers engaged, for example. Consumers may be using transportation services less often, and therefore diversifying their services can help sharing economy companies stay competitive.
Sharing economy companies’ circumstances are improving, and the space is predicted to reach $335 billion in value by 2025. It remains crucial for sharing platforms to engage new customers and retain existing ones, however, and this now requires providing speedy and safe experiences to suit consumers’ shifting data security concerns. Synthetic identity fraud schemes have jumped 36 percent since 2018, and this increase has made consumers as well as businesses more cautious when deciding whether to share information.
Sharing economy firms must also be sure that the digital identification measures they are using to verify their customers and those offering services via their platforms keep both parties safe. Interactions on such platforms go beyond logging in, meaning any breaches could have severe ramifications for users’ physical and digital safety. Robust identification measures can create lasting trust among consumers and participants on these platforms, and allaying consumers’ security and physical safety concerns should remain paramount for sharing economy firms.
The following Deep Dive examines the challenges and frictions these platforms face when verifying users’ identities. It also analyzes how tapping emerging technologies such as biometrics and moving to continuous verification could foster trust and provide other key benefits to sharing economy firms as the economy grows.
Meeting The Consumer Trust Challenge
Allowing consumers to seamlessly access services online has long been a fundamental draw of the sharing economy. Most of the industry’s companies are mobile or at least digital-first firms, supporting services that consumers can access directly through their smartphones or allowing drivers, couriers or movers to receive payments via their smartphones. The pandemic has not affected sharing economy participants’ expectations regarding seamless login experiences, but it has changed the value they place on the digital security measures attached to this process — especially as the industry’s innately digital nature makes it appealing to bad actors.
American consumers collectively lost $56 billion to identity fraud in 2020, and such scams affected 49 million individuals. Eighteen percent of all identity fraud schemes for nonfinancial services during the past year occurred on delivery services such as DoorDash and Grubhub, one of the most popular segments of the sharing economy. This increase in online identity theft has prompted consumers to more closely examine the identity verification and security tools that sharing economy businesses offer before they onboard.
Concerns about data privacy are becoming particularly prevalent among consumers. One 2019 report found that 70 percent of Americans believed their digital data was less secure than it had been five years before the time of the study, which means that one of sharing economy firms’ main challenges is reassuring consumers that their digital identity solutions are highly secure. This perceived danger is particularly troubling because any digital identity shortfalls can directly impact users’ physical safety. One study found several instances of rideshare drivers in the Boston area utilizing stolen identities to pass background checks, allowing them to drive for the services under false pretenses.
Another recent report found that criminals tapped previously stolen information to sign up for false accounts on sharing economy apps before then using that access to rent or sell these accounts to users who were not qualified to work for these companies. This illicit behavior can harm not only the original identity theft victim but also the riders these drivers are serving, and these issues can ultimately erode the trust that is critical to driving customer engagement and loyalty for sharing economy businesses.
Creating that sense of trustworthiness may prove more difficult for some sharing economy companies, however, as many of these firms still use details such as email addresses and passwords to authenticate users and keep their experiences speedy. PYMNTS’ research has found that almost 72 percent of sharing economy participants were asked to verify their identities only by providing their email addresses. Consumers are now expecting much more, however, making it key for sharing economy companies to introduce newer identification tools that can give them more confidence in security when interacting with sharing economy companies as either customers or participants.
Bringing Biometrics Into The Game
Today’s consumers expect firms to take the necessary steps to protect their digital identities and their physical safety. PYMNTS’ research also found that more consumers are questioning the technologies that firms are utilizing for data security. Nearly 50 percent of respondents ranked understanding the underlying technology keeping their personal information safe as the third-most important factor when creating accounts or interacting with existing entities. The two preceding factors were knowing that their sensitive information is protected and the reassurance that their data will not be shared with third parties.
Sharing economy companies must step up their game to satisfy consumers’ new security expectations. This is where emerging technologies such as biometrics could come into play, allowing consumers to authenticate themselves using devices with which they are already familiar. Most smartphones are already equipped with biometric fingerprint scanners, and this trend is likely to expand over the next several years. Offering biometrics also provides consumers with more reassurance that their data and physical safety are accounted for, as these tools rely on identifiers unique to the individual in question. Examining how the use of such identification measures could benefit their platforms should therefore be a priority for entities in the sharing economy.
The Future Of Identity Verification In The Sharing Economy
Differentiating between legitimate customers and fraudsters is essential for sharing economy companies despite the evolving fraud threats they face. Businesses and government agencies are reporting more concern regarding synthetic identity theft in particular, as this type of scheme is becoming more common across industries. One June 2020 report found that 85 percent of credit applications at one credit union were made by fraudsters using synthetic identities, for example, highlighting the pervasiveness of synthetic fraud threats. Catching this type of fraud remains difficult for companies, however, with the report revealing that traditional fraud protection models fail to catch between 85 percent and 95 percent of synthetic identity fraud.
Failing to protect against this and related fraud schemes can have severe consequences for sharing economy companies, as such attacks could imperil consumers’ physical safety as well as their financial security. Rideshare firms that do not have robust digital identification measures in place to authenticate customers and drivers, for example, could find that bad actors slip onto their platforms using false identities. Data breaches originating from fraudsters using false identities can also significantly cost these companies, as the average price of a data breach reached $3.7 million in 2020.
Leveraging digital identification solutions that can keep users safe online and in-person is key for sharing economy entities, but doing so may require a change in how firms typically approach cybersecurity. Integrating biometric identification measures such as fingerprint or facial recognition is one way to enhance authentication processes, but companies must broaden their idea of authentication beyond the point of onboarding or initial login. Implementing identity verification solutions that continuously confirm platform users’ identities — as well as collaborating with other platforms and with third-party firms — can build crucial trust in platforms’ security and drive further user engagement.