October 21, 2016
Sharing Economy: The Concept of Trust
Those participating in the sharing economy require one thing above all: trust. Here are three ways to foster it.
Trust is an abstract concept that gets thrown around a lot these days. But trust is increasingly factoring into our lives, particularly in the world of online marketplaces, which are everywhere these days.
These peer-to-peer exchanges, often referred to overall as the sharing economy, are great for consumers. These sharing platforms are how people and businesses leverage underutilized assets, whether cars in the case of Uber, homes through Airbnb, knowledge through Udemy or labor through WeGoLook.
See also: What to Learn From Sharing Economy
There is one thing upon without which these marketplaces could not operate:
In our new world of online marketplaces, traditional intermediaries are gone. Trust is how consumers protect themselves. Trust is how we choose to sell or buy from one another, and it’s the foundation of a massive transformation in online business that is unfolding before our very eyes.
The Concept of Trust
The concept of trust is by no means new, but it has never played such an integral role in the world of economics as it does now.
In the online world, how do strangers convince each other to engage in what the always amazing Rachel Botsman describes as a trust leap?
Before the advent of the sharing economy, trust was easily established through big brand intermediaries. You trusted that Amazon would not rip you off because, well, it’s Amazon! When buying online through Wal-Mart, trust was established because…you guessed it… you’re buying from Wal-Mart.
This trust model is easy to understand, but more recently, trust has been decentralized to new P2P markets.
How do you know that Joe, who is renting a room to you through Airbnb, isn’t a complete weirdo and isn’t going to leave you out in the cold?
I’m glad you asked.
The Sharing Economy Democratizes Trust
The sharing economy achieves trust in three vital ways:
The first step to establish a higher level of trust is rating and review systems.
It’s human nature to want reassurance that the hard-earned money you’re about to spend isn’t going to be wasted on a crummy product or service. The benefit of allowing a buyer to rate his experience should be obvious, especially as more reviews of a product or service pile up.
Whether someone is booking a home, driver, tutor, graphic designer or inspector, ratings are the basis upon which users of the sharing economy make their purchasing decisions. Without ratings, the sharing economy would be the wild West!
2. Two-Way System
Platforms such as Uber and Airbnb are the pioneers of the two-way rating system, whereby users and sellers both rate each other. This not only helps buyers decide who to engage with but gives sellers an idea of who they’re about to share their asset with.
Many have critiqued this two-way rating system, believing that it will give rise to retaliatory rating battles. You gave me a bad rating? I’ll give you one!
But these critics are wrong. Most, if not all, sharing economy platforms that employ a two-way rating system will not display ratings until both the buyer and seller have submitted their rating. Problem solved!
See also: Why to Embrace the Sharing Economy
So, to bring traditional review and rating system to the next level, Amazon should allow authors to rate their readers. Just kidding, but you get the point.
When it comes to service providers in the sharing economy, a two-way system makes complete sense.
3. Be Less Anonymous, and More You!
Finally, one of the most critical components that fosters trust in the sharing economy is the encouragement to prove your identity. Most platforms encourage, and enforce, social proof on your profile. This includes the uploading of IDs, connecting social media accounts or inputting contact information.
People are more apt to buy from someone they know, like and trust. Showing who you are, telling your story and providing proof of who you are will increase earnings for sellers in the sharing economy. So it’s no wonder that most sellers embrace less anonymity!
Trust can be elusive, especially in an era where most economic exchanges occur digitally. But the sharing economy has proved to us that trust can be established between two complete strangers.
Now it’s your turn; please share your thoughts on the role of trust in the new digital economy, and if there are other ways online platforms are fostering this important concept.