The sharing economy is a comparatively recent economic idea, yet it is fast increasing. It’s predicted to reach $335 billion by 2025.
eBay was the first widely known sharing economy platform with online P2P buying and selling. After more than two decades of eBay, the sharing economy offers other solutions also, such as ride-sharing, crowdfunding, apartment sharing, and many others.
What is Sharing Economy and Why does KYC matter?
Renting or sharing commodities has long been a well-known notion. Still, technological advancements and the expansion of the digital world have converted the act of spreading into a new and profitable economic structure. The adoption of mobile applications has made sharing economy platforms more accessible and convenient.
The sharing economy is a distinct business model from the traditional one. People exchange assets directly through cooperation on the internet under this economic paradigm. The term “sharing economy” is also known as the “peer-to-peer economy” and the “collaborative economy.”
It is an economic structure that allows for the peer-to-peer provision of goods and services on demand. Customers are encouraged by choice and ease in everything from shopping and entertainment to banking and transportation. Uber, Airbnb, and TaskRabbit serve as poster children of sharing economy. The backbone of the sharing economy is primarily founded on trustworthiness.
However, because these platforms are typically used to facilitate in-person interactions, verifying the identity of all users has become critical.
What are the vulnerabilities in Sharing Economy?
The sharing economy is founded on e-commerce. While e-commerce has risen dramatically in recent years, a lack of adequate verification methods has left enterprises in this sector vulnerable to fraudulent activity. And start it all off, the current rampant theft and selling of identification papers have resulted in an identity fraud catastrophe. Several horror stories exist online about people exploiting stolen identities to join short-term rental sites and other sharing platforms to commit theft, damage, and fraud.
Uber can be an excellent example of sharing economy. The prevalent ride-sharing platform through a mobile app has over 93 million active customer onboarding and over 3.5 million drives globally. Although it is a trailblazer, the cases of robbery, violence and other incidences have often kept Uber in chaos.
Airbnb also provides a P2P platform for users to rent accommodations for a few days with the “Home away from Home” facility. It has a massive 150 million users worldwide. However, the company often faces the identity verification dilemma and pays almost $50 million yearly to compensate the users. As per Bloomberg research, fake listing is also a significant problem for Airbnb.
Why is KYC the solution for Sharing Economy woes?
Sharing economy is not limited to a single industry. Depending on the nature of sharing economy platform, specific identity verification and customer due diligence are the keys for the companies to comply when onboarding new users.
KYC is a regulatory and required obligation for banks and any regulated organizations on a larger scale for identity verification. It is the method through which businesses determine who their consumers are. It is especially significant for financial institutions since it allows them to connect faces to customer identities, avoiding criminal actions such as financial fraud, tax evasion, and terrorism funding. KYC is integral to the client’s onboarding process, whether they are individuals or organizations. Traditionally, this was done in person, but FinTech businesses have revolutionized and transformed how we all do eKYC into the digital era in the past decade.
How are eKYC tools used in Sharing Economy?
- Document Verification that automates manual data entry.
- Liveness Detection checks if the user is real and alive.
- Face Trace to enhance customer experience and ensure the real identity of the person behind the document.
- AI-based face match authentication that recognizes authentic customers in real-time.
- Video KYC ensures seamless onboarding.
- Government DataBase checks that authenticates Aadhar card, voter ID card, Passport, Pan Card, or any government-issued identity card.
From a regulatory perspective, identity verification strategies are crucial for operating a sharing economy platform. Government agencies levy a considerable fine for non-compliance with primary identity verification.
However, more than government agencies, identity verification ensures the smooth operation of businesses. Facial verification, liveness detection, and biometrics are great eKYC tools to thwart fraud attempts.
The establishment of P2P platforms is based on trust; without it, the system collapses. Businesses are moving to cloud computing to provide faster and safer onboarding to keep in pace with the customer expectations. The symbiotic nature of this industry call for a tailored onboarding flow based on the field of its operation and taking shortcuts to this can be detrimental to the brand reputation. Companies need to get acquainted with their customers to comprehend the applicability of the specific identity verification solution.
IDcentral offers comprehensive identity and onboarding solutions to satisfy the various business needs based on sharing economy. The growth of P2P transactions has been exponential in the last two decades. With the appropriate KYC solutions, sharing economy-based businesses can ensure flourishing growth without significant setbacks.