People are social by nature. We interact with others for work, recreation, entertainment, commerce and myriad other reasons. Now, the power of online marketplaces, digital communities and the sharing economy has amplified the ability to connect with others, extending our effect on and reach to a global audience. Unfortunately, it also offers bad actors the same capabilities, creating the need for new corporate trust and safety initiatives.
People can rent their accommodations out to someone who is lives halfway across the world. Or take a ride with a total stranger by simply clicking on a ride-sharing app. They can work for a virtual company, open an online storefront, participate and gather information on forums and otherwise lead digital lives that can have direct consequences on their real selves.
If people perceive an online marketplace or community to be unsafe, unreliable or problematic, the incentive to participate is vastly reduced. The cornerstone of success for any marketplace is providing a safe and trustworthy environment; the better an operator can deliver on providing trust and safety, both in terms of operation and perception, the better the foundation for long-term marketplace success.
As opposed to compliance, which is mandated by legal and regulatory requirements, trust and safety are company programs to protect participants and the reputation of the marketplace as a fair and safe place to transact or interact. By helping keep out fraudsters, bad actors and others that misrepresent their identities or products and services, marketplaces gain credibility as a place to do business as well as decrease various costs associated with fraud.
The importance of trust
The sharing economy is “an economic model defined as a peer-to-peer (P2P) based activity of acquiring, providing, or sharing access to goods and services that is often facilitated by a community-based on-line platform” (Investopedia). The growth of the sector is astounding, from $15 billion in 2014 to a projected $335 billion in 2025. Note, that projection is from before the global COVID-19 pandemic; as the move toward the digital-first economy is accelerating, those projections might need to scale up.
New digital behaviors are often accompanied by trepidation, doubts and concerns. If the experience is pleasant and no cause for worry, the new behavior can be quickly adopted and become second nature. Consumers might hesitate on the first ride-share or room-share, but once they experience how easy and safe it is, they can become converts to a new way of doing things.
The critical point of the journey is establishing trust; it’s the make-or-break point where a person decides to give their credit card, offer their services, have confidence in an unknown party and believe in the sharing operator.
In general, without trust, people will walk or switch to other providers. Consider that, according to Accenture Strategy, in 2017 the global economic value of switching providers was $6.6 trillion. And 41 percent of (U.S.) customers who switched providers did so because of an issue of trust. While these numbers are for the economy as a whole, not just online or marketplaces, they do indicate the consequential nature of trust. One could argue that it’s even more important for new digital sharing experiences, as the unknown elements are ramped up even more; new channels, new technologies and new people all add to more potential for the breaking of trust.
Building trust online
What are some trust factors for online marketplace? There are numerous considerations, including:
- Quality of profile
- Age of account
- Reputation of account
- Number of transactions
- Number of complaints
- Response to feedback
- Age of marketplace
- Size of marketplace
- Reputation of marketplace
- Transaction amount
- Risk level
Perhaps the most important consideration is the type and quality of identity verification. After all, if there’s no verification, how does a customer know that they are dealing with a real person, or whether the person is in fact dishonest or dangerous? Surprisingly, one study by PYMNTS found “71.5 percent of sharing economy platform users are asked to verify their identities by simply providing their email addresses when creating new accounts.”
Even when there is identity verification, there are potential onboarding issues. In a Trulioo account opening survey, 87 percent of respondents had concerns about identity theft and fraud when opening online marketplace accounts. And 77 percent will walk away if that account opening process provides a poor experience.
As the World Economic Forum points out in Reimagining Digital Identity: A Strategic Imperative, “problems remain in validating the identity of actors and users throughout the marketplace. Good digital identity will build confidence and trust, improving the economic potential for businesses of many kinds.”
Fortunately, digital identity verification processes are available that can provide both the necessary security and trust building elements, while delivering a seamless and relatively quick experience. Deploying good digital identity measures is not onerous or unreasonable and offers consumers a signpost of trust; customers signing up who go through identity verification measures can sensibly assume that other participants must do so as well.
Mitigating risk and preventing fraud
Some marketplaces take a caveat emptor approach, buyer beware. While, in the end, it is the consumers’ time, money and experience that is at stake, many marketplaces understand that to create a thriving market requires protecting the consumer.
Strict rules, holding of funds, review processes, refunds and insurance are some of the ways that marketplaces can protect their customers and their reputation. However, these measures also add to the cost of operations and cut into profitability.
Effective due diligence measures at onboarding, or triggered by certain events, can help lower the overall risk level and therefore cut costs and improve the health of the business. Many of the most successful marketplaces have a risk-based approach, requiring more or less due diligence depending on the circumstances.
Similar to the trust considerations listed above, numerous risk factors can be analyzed and monitored to determine if the pattern is within normal parameters, or should be flagged for further investigation. Of course, “normal” will vary according to aspects such as the account history, market, transaction profile and the awareness of ever-changing fraud schemes.
In terms of identity verification, if an account or transaction is flagged, additional identity verification measures can be requested. For example, initial onboarding may request identity information such as name, date of birth, address and national identification number. For further due diligence, the marketplace can request an ID document verification, which requires the customer to provide images of their official identity documents plus a selfie.
Collecting information is one thing, protecting it is another. Depending on the marketplace or community, often personally identifiable information (PII) is collected, and the requirements for handling that PII are generally stipulated by law.
Beyond PII, marketplaces often collect other sensitive data including credit card, bank, tax, employment, location and usage details. Any data breach can bring the attention of regulators, as well as financial and reputational damage.
It’s imperative that marketplaces have secure and confidential data handling practices, from account opening all the way through to account termination
The elements that make up a successful trust and safety program are not isolated to marketplaces and other organizations operating in the sharing economy. Good onboarding experiences, robust security and privacy measures, proper due diligence and attentive monitoring of activities is solid advice for any business. However, for marketplaces, as they deal with both parties of the transaction, ensuring that the parties can interact safely and with trust is core to the mission. For marketplaces, trust and safety IS the value proposition.
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