Setting the problematic
In February, I acted as a sale representative for Camptoo during The Caravan, Camping and Motorhome Show in Birmingham. In simple terms, Camptoo is the Airbnb for homes on wheels and its business model fits perfectly within the scope of the sharing economy.
During the show, I asked caravan owners if they were interested in listing their caravans onto our platform. This required plenty of interaction with caravans’ owners and I must say that I received a very wide range of responses. It was pretty common to hear some rather unfriendly remarks such a “Sharing my caravan with a stranger, are you crazy?!” or “I would not even lend it to my kids!”
I simply could not understand why people would not be interested to earn money by sharing their caravan when not using it. What is restricting them from earning about £100 a day?
I tried to find some explanations to these rather surprising feedbacks and I came to the conclusion that the most recurrent rejections were linked to a lack of trust. A caravan owner would simply not trust an external person to use it.
Trust is a fundamental concept and I want to analyze in detail the role that it plays within the sharing economy. In this blog post, I will first give a historical background of the notion of sharing and will explain why trust is so important in this type of practice. I will then seek to evaluate the effectiveness of the tools that have been created in order to enhance trust.
Putting Trust into perspective
Even though it is hard to give a precise definition of the sharing economy, it is important to have an idea of what it stands for to understand the significance of trust. In brief, I believe than when consumers grant each other temporary access to under-utilized physical assets, possibly for money, then they operate within the scope of the sharing economy. It is important to bear in mind that the sharing is about peer-to-peer and not about renting or leasing a good from a company (Frenken, 2015).
Sharing under-utilized resources is not just a recent phenomenon. People have always shared with their community to survive. In the book ‘All our Kin’, Carol Stack gave a fascinating testimony of the time she spent in an African-American ghetto community in the 1960s, where she studied the support system family and friends formed when coping with poverty (Stack, 1974).
Her study showed that families adapted to their poverty conditions by forming large and highly structured support networks based on friendship and family. She highlighted the dense relations of interdependence among poor black communities in the US, which showed how crucial sharing assets was to survival. Sharing in that case was confined to trusted individuals such as family, friends and neighbours (Frenken, 2017).
However, while sharing used to be limited to a small circle of people within a community, there is something particularly new about the sharing economy, what Juliet Schor calls “stranger sharing” (Schor, 2014). Internet sharing platforms are truly transformative as they facilitate sharing among people who do not know each other. New technologies connect people in ways impossible before and they have pretty much allowed us to share goods with anyone in society.
Stranger sharing entails a certain degree of risk. I can say with a high degree of certainty that many of us have been brought up by our parents with the idea that stranger equals danger. Airbnb had to deal with what they called the stranger-danger bias. Getting people to have strangers sleeping in their home when they are not around seemed like an impossible task (Gebbia, 2016).
Many of today’s exchanges are very intimate, such as sharing a car, home or caravan and this is where the whole idea of trust comes into play. Trust is the backbone of the sharing economy. In a recent survey, 89% of respondents said that trust was the basis of all transactions between providers and users in the sharing economy (Marsal, 2017).
I believe that trust should be achieved on two levels:
- A consumer must have confidence in the platform.
- A consumer must decide if the other person he is dealing with, the stranger is trustworthy.
- Graphical representation of trust (Botsman, 2016).
Rachel Botsman defines trust as a confident relationship to the unknown. Trust involves an element of placing faith into a stranger (Botsman, 2016).
How does Airbnb, whose business model is based solely on the willingness of strangers trusting one another could work so well across 191 countries (Botsman, 2016)? Which mechanisms have been installed by companies to achieve trust in the sharing economy?
Online Profile
During a TED conference, Joe Gebbia, Airbnb’s Co founder asked the crowd to unlock their phone and hand it to their left neighbor. It was easy to feel a little sense of panic within the crowd. A person feels at risk when he connects on a personal level with a stranger. He then asked the audience to introduce themselves and the level of panic decreased sharply (Gebbia, 2016).
Airbnb found that having hosts and guests creating an online profile helped to create a more familiar picture of themselves for the other person. When creating a profile, building the right amount of trust requires the right amount of disclosure. For example, when a guest first messages a host, if he discloses too little information, the acceptance rate will go down. The platform encourages them to disclose just right amount of disclosure by guiding them with a simple design, shown below.
Blablacar is a platform that matches drivers and passengers who want to share long distance journeys together. The average distance is 300 km so it is important to choose your fellow driver wisely. The social profiles, where users specify whether or not they are smoker, which kind of music they like, how much they are going to talk help people to make a choice on who to share the ride with (Botsman, 2016).
These give straightforward illustrations that creating an online profile when delivering a service within the sharing economy is a good starting point to build a sense of trust between strangers. Airbnb and Blablacar are two examples of how photos can influence a consumer’s decision-making.
Social bias can lead to real life discriminations
However, there is a significant downside with such a system. When reserving an apartment on Airbnb, there is a personal feel as you are staying at someone’s home and it is likely that people will pay more attention to personal characteristics such as gender, age of the home’s owner or the guest. Letting people deciding whom to do business with after having seen a name and a picture is a market design choice that may enables discrimination (Martinovich, 2017).
A recent experiment found that requests from guests with distinctively African American names are 16% less likely to be accepted to stay in an Airbnb compared to identical guests with white-sounding names (Edelman, 2017).
Many people who faced discrimination shared their stories on social medias using the hashtag #AirbnbWhileBlack. These suggest that Airbnb’s design choice facilitates discrimination and may erase some of these civil rights gains. It is not surprising that CEO Brian Chesky declared discrimination to be the biggest challenge faced by company (Ramaswamy, 2017).
Furthermore, using the example of Uber, it has been shown that rides for men with black-sounding names were cancelled more than twice as often than other men (Ramaswamy, 2017).
Reputation systems
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Reducing exclusionary behaviours
In response to the issue of discrimination that has no place in our society, Airbnb conducted a study with Stanford University on how to overcome similarity bias. The study showed that by implementing measures that emphasize a user’s reputation, such as stars or reviews, the harmful social bias could be drastically reduced (Martinovich, 2017).
Platforms that use such reputational tools create a fairer and a more diverse online marketplace. Trust can be extended to people with a high degree of dissimilarity and hosts with better reputations attract more demographically diverse guests (Martinovich, 2017).
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Creating trust between strangers
Technology can be used to influence people’s perception of trust. In the review process, a person rates another individual over the Internet, and the review is then displayed on the user’s profile. The testimony of other people creates someone’s online reputation.
This has led Rachel Botsman to say that “in the new economy, reputation will be your most valuable asset”. She believes that this is the beginning of a new economy based on one’s good name, where “reputations on and off-line will merge to create a marketplace where trust is the currency” (Botsman, 2016).
According to Airbnb, a host with 10 reviews is ten times more likely to get a booking than a host with no review. This makes sense as the more ratings you have, the more trustworthy your profile becomes (Maier, 2016).
“In the new economy, reputation will be your most valuable asset” – Rachel Botsman
Limitations
A well-designed reputation system is key for building trust. However, the effectiveness of such systems depends on the motivations of those making the reviews: Reputation is effective only if the feedbacks are made in an independent way.
Lets take two examples to illustrate this idea.
- When looking at a movie’s rating on Netflix, it is fair to believe that these ratings are independent and honest. The person making the review is not expecting reward or punishment for the rating given. He can therefore give his opinion freely, making his review genuine (Slee, 2013).
- With Blablacar, if you give a driver a review that is below five stars, then the person receiving the review will be likely to give you a harsh review in return. Do you want to say that the car was a bit dirty and reduce your chance of getting future rides? Or would you prefer giving a five stars review and not riding with him again (Slee, 2013)?
The fear of being penalised for giving a negative feedback means that there is a tendency to give over-optimistic reviews, which does not meaningfully discriminate drivers or riders. Such a system is flawed as it does not offer the possibility to differentiate users and consequently, it does not act as an effective signal of trustworthiness.
Airbnb found a way to solve this issue. To encourage good quality feedback, the platform decided to make reviews available only after both guest and host have submitted them. This way, both parties will not feel swayed by the feedback given by others, resulting in a more honest and reliable assessment. This small change actually increased the objectivity of the reviews (Maier, 2016).
Internet reputation systems create a global village by scaling up informal word of mouth reputation in order to create trust (Slee, 2013).
Identity verification
Establishing trust in a peer-to-peer marketplace fundamentally lies in the identity verification of the users. For consumers to be willing to use sharing economy services, they must be confident that the individual on the other end of the transaction is a real person. In a survey of 2,000 consumers from the US and UK, 79% said that they would trust a stranger online only if they had assurance of identity (Clark, 2017).
In 2013, Airbnb introduced an identity verification process to its platform, adding more transparency and reducing the fear of fraud. However, most profiles on sharing-economy platforms are currently unverified, which means that users rely solely on peer reviews to determine if the stranger is trustworthy (Marsal, 2017).
Companies must find ways to verify a person’s identity in a manner that will not create too much friction, turning away consumers. New mobile technologies provide a fast and easy way to securely verify a user’s identity in digital channels. During the enrolment process, a new user can use the camera on its smartphone to scan his government’s identity document to instantly verify the authenticity of the ID. For additional security, a person can also be identified using facial comparison technology that matches a selfie to the photo on the ID. This enables businesses and users to tie a person’s online identity to their identity in the real world (Marsal, 2017).
In the sharing economy, users need to be able to trust platforms’ screening process for providers before they deal with them (Bohsali, 2017). This means that all businesses must urgently implement this technology during the enrolment process not only to reduce fraud, but also to increase the safety of their users. Verifying identities is a key building block to establish trust in peer to peer transactions.
Insurance
For the sharing economy to be successful, we have shown that trust between the platform and individuals must be established. This is where the problem of insurance comes into play. It is becoming apparent that trust needs to be reinforced with an extra layer of insurance to win over risk-averse users (Val, 2017).
Even though insurance is a complex topic and would deserve a lot of attention, I think that this post would be incomplete if it does not give a concise overview of the role played by the insurance process.
I will focus on two brief case studies to illustrate how some platforms have come about with this issue.
BlaBlaCar has worked with the insurance company AXA to offer its users an innovative insurance product that provides free additional insurance cover for long distance ride-sharing. In France, BlaBlaCar’s journeys now include breakdown cover, which consists of towing the vehicle to the nearest garage if it cannot be repaired on the roadside (Axa, 2015). This collaboration creates an even more reliable service, which undoubtedly increases the level of trust with the community. Consumers feel relatively safe and better protected when using such a new service.
As Airbnb is a canonical example of the sharing economy, I am sure that you would be interested to know what would happen if a guest damages someone’s home. A 2011 landmark incident, referred to as ‘Ransackgate’, involved a person renting out her flat in San Francisco on Airbnb. The guests vandalised the property and stole some credit cards (Val, 2017). This event has lead Airbnb to create its Host Guarantee scheme. This is a lengthy document but in short, subject to the limitations and conditions set out in the scheme, Airbnb guarantees the host protection for up to $1 million for damages to the property or possessions caused by the guest (Airbnb, 2017).
An exciting ecosystem, made of traditional insurers, platforms and Insurtech startups has emerged and is collaborating to provide innovative and flexible insurance solutions to the market. A well functioning and adapted insurance industry is essential to create trust between individuals and the online platforms.
Concluding thoughts
A few years back, it would have seemed completely absurd to let a stranger sleep in your home. But today, on any given night, around 2 million people are staying in other people’s homes around the world on Airbnb (Airbnb, 2017). The sharing economy is here, and it is constantly growing.
I believe that technology has created new mechanisms that have helped people overcoming their most deeply rooted stranger danger bias. Once trust is achieved between strangers, people are confidant to operate within the sharing economy, which is key to sustain its growth and success.
The combination of an online profile, independent reviews, the guarantee of a user’s identification and the backing of insurance means that a consumer has all the reasons to trust a stranger.
Caravans’ owners may reconsider sharing their home on wheels.
References
Airbnb, 2017. Airbnb Fast Facts. [online] Available at <https://press.atairbnb.com/app/uploads/2017/08/4-Million-Listings-Announcement-1.pdf> [Accessed 25 March 2018]
Airbnb, 2017. Host Guarantee Terms and Conditions. [online] Available at <https://www.airbnb.com/terms/host_guarantee> [Accessed 25 March 2018]
Axa, 2015. BlaBlaCar and AXA launch first-of-its-kind ridesharing insurance product. [online] Available at <https://www.axa.com/en/newsroom/press-releases/blablacar-insurance-ridesharing> [Accessed 24 March 2018]
Benjamin Edelman, 2017. Racial Discrimination in the Sharing Economy: Evidence from a Field Experiment. [online] Available at <https://pubs.aeaweb.org/doi/pdfplus/10.1257/app.20160213> [Accessed 24 March 2018]
Carol Stack, 1974. All Our Kin: Strategies for Survival in a Black Community. Harper and Row, New York
Chitra Ramaswamy, 2017. Prejudices play out in the ratings we give, the myth of digital equality. [online] The Guardian, Available at <https://www.theguardian.com/technology/2017/feb/20/airbnb-uber-sharing-apps-digital-equality> [Accessed 24 March 2018]
Esther Val, 2017. Insurance: The Next Frontier for Online Peer-to-Peer Marketplaces. [online] Available at <https://www.sharetribe.com/academy/insurance-for-online-marketplaces/> [Accessed 25 March 2018]
Joe Gebbia, 2016. How Airbnb designs for trust? Video recording Youtube, viewed 24 March 2018, <https://www.youtube.com/watch?v=16cM-RFid9U>
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Koen Frenken, 2015. Smarter regulation for the sharing economy. [online] The Guardian, Available at <https://www.theguardian.com/science/political-science/2015/may/20/smarter-regulation-for-the-sharing-economy > [Accessed 24 March 2018]
Koen Frenken, 2017. Putting the sharing economy into perspective. [online] Available at <https://www.sciencedirect.com/science/article/pii/S2210422417300114 > [Accessed 24 March 2018]
Milenko Martinovich, 2017. Stanford study examining Airbnb users and data suggests that reputation can offset social bias. [online] Available at <https://news.stanford.edu/press-releases/2017/09/05/reputation-can-offset-social-bias/> [Accessed 24 March 2018]
Rachel Botsman, 2016. We’ve stopped trusting institutions and started trusting strangers. Video recording Youtube, viewed 24 March 2018, <https://www.youtube.com/watch?v=GqGksNRYu8s>
Samer Bohsali, 2017. Embracing sharing: Managing the disruption of the sharing economy in the GCC. [online] Available at <https://www.strategyand.pwc.com/reports/embracing-sharing> [Accessed 24 March 2018]
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Steffen Maier, 2016. Learn From These 3 Ways Airbnb Won the Trust It Needed to Succeed. [online] Available at <https://www.entrepreneur.com/article/280224> [Accessed 24 March 2018]
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Trust in the Sharing Economy 