Identity Verification: A Bulletproof Vest Against Sharing Economy Fraud

Over the previous year, you might have observed how the world has become increasingly dependent on the concept of a “Sharing Economy”. Whether we had food delivered at our doorstep, rented a hut in the hills for a staycation, or ordered a cab through a ride-hailing app, the trend is here to stay. While the journey of this economy has been impressive so far, the path had its share of twists and turns. 

The impact of identity theft, fraud, and regulatory fines resulting from strangers with an unverified identity and accounts cannot be left unnoticed. With identity fraud losses reaching an all-time high of USD 43 billion in 2020, sharing economy companies that fail to implement identity verification on their users are in for a bumpy ride in the upcoming years.

The sharing economy is synonymous with the terms peer-to-peer economy and collaborative economy. While activities such as rides, accommodation, and talent sharing plummeted in 2020, so did the demand for home-delivered groceries, products, and coworking spaces. As this trend continues to disrupt the way we live, work, and consume, the shared economy industry is estimated to reach a value of USD 335 billion by 2025. 

Addressing the Sharing Economy Challenges

With millions of individuals using collaborative services like Airbnb, Lyft, Upwork, etc. today, the sharing economy model has undoubtedly brought convenience into our lives. However, this does not indicate that the sector is immune to any barriers. Although the industry continues to thrive, three major challenges that are emerging include: 

1. Manual Onboarding – A Thing of the Past

To perform identity verification during onboarding, companies previously relied on manual identity checks. This included asking users to provide an identity document as proof of address or obtaining an ID card or passport. Sharing economy startups have now realized that these methods of identity verification are no longer sufficient, as they are time-consuming, frustrating, error-prone, and provide poor customer experiences. Therefore, for this model to sustain, an automated identity verification process has to replace the conventional outdated method. 

2. Stranger Danger

A major issue that lies at the center of the sharing economy model revolves around the identity of the service provider. After all, why would you allow a stranger into your house or allow them to get in your car when you’re unaware of their true identity? 

As the future of this industry depends on robust security measures, accurate identity verification is crucial. At the end of the day, it’s all about knowing who your driver is, that the masseur coming to your house is actually who they claim to be, and whether the apartment you’re renting actually belongs to the owner or not. 

3. Identity Theft

Unfortunately, numerous sharing economy platforms are poorly equipped with identity verification technologies to win the battle against frauds such as identity theft. In the U.S., only 24.3% of sharing economy service users are asked to prove their identity when signing up for a new platform. Apart from this, 71.5% of users are simply asked to provide a valid email ID address for identity verification. Although this brings convenience and encourages consumers to sign up with the platform, it also makes it incredibly easy for criminals to pose themselves as legitimate customers. 

On the other hand, without a strong security and check mechanism in place, fraudsters can carry out phishing attempts and cyberattacks to steal customer data. This not only leads to devastating consequences for customers but causes reputational damage to the brand as well.