Why trust is so important for the sharing economy to thrive

The saying goes that trust takes years to build, seconds to break and forever to repair.

It’s certainly true in everyday life, where we have spent thousands of years developing ways to trust one another, whether it’s how we trust our neighbours or whether we trust major brands.

Online, where we don’t have the benefit of face-to-face interaction, trust becomes harder to build, but more important than ever.

Given the internet as we know it is only two or so decades old, those trust methods are still developing but maturing rapidly. In the process, it’s making entirely new businesses possible that would not have existed ten years ago.

Trust, for instance, underpins the emerging sharing economy. Without it, we don’t know the house we’re renting over Airbnb will be cared for by the tenant, or if the job we outsource through AirTasker will be done correctly and to specification.

Without trust, the sharing economy wouldn’t thrive. According to recent PwC research, nearly 70 per cent of survey respondents said they would only use a sharing economy company recommended by someone they already trusted.

At the same time, 64 per cent wanted to participate in a sharing economy regulated by their peers, rather than the government. In other words, they want to establish trust themselves among one another.

Establishing that trust isn’t easy. As the infamous New Yorker cartoon once stated “on the internet, nobody knows you’re a dog”. While people now live more of their lives online, there are often few elements to truly determine who that person is on the other side of the internet connection.

It’s a bit like running a nightclub. You can have the best location, a funky design, good drinks and great music, but it all comes down to what the patrons experience. If they have a great time, they will stay longer, drink more and bring their friends the next time. A really popular nightclub is a result of both the nightclub and its patrons — they both add value to the overall experience and make it a place that others want to enjoy.

Another nightclub may open nearby with a similar formula but could be a total failure. They may have got the tangible elements right, but they failed to create the right ‘feel’.  Similarly, many online communities fail because they do not demonstrate why members need to co-operate and provide incentives for good behaviour.

Online trust rarely develops spontaneously. It has to be nurtured, and this is where intermediaries play a vital role: after all, most people would be unlikely to rent out their home over Twitter, because there is no way to establish and monitor trust on the social network.

Intermediaries provide the tools necessary for people to establish initial trust between one another, using credentials that confirm their identity (ensuring they are who they say they are), and determine their ability to pay when the time comes.

That level of trust increases as people continue using the platform, publishing and receiving feedback on their interactions. The marketplace sets the rules about how people should interact to achieve the most positive outcome and provides the tools for people to provide their details and then have them validated.

Once people begin interacting with each other, the community takes over, by adding feedback on their experience with other members. Feedback mechanisms promote good behaviour by the community’s members and ensures that, if they are trusted, they can continue being involved with the community.

Take Jeff Folland, a member of the DriveMyCar community who has rented out up to four BMWs at any one time to everyone from international students to someone waiting for their Porsche to be delivered. His level of trust in the community prompted him to purchase cars purely to rent them out — because he knew that the cars would be taken care of by those he rented to.

Without the intermediary, there are no rules that determine how such an interaction should take place, and no safety net that ensures that, if something does go wrong, the owner or renter isn’t left in the lurch. The intermediary’s ability to provide insurance, secure payment systems, deposit bonds or penalties for inappropriate behaviour are vital to ensuring the community continues to exist.

As peer-to-peer transactions continue to grow globally, online trust profiles will be essential to participate in the sharing economy. Those without it will not be able to access the best value or the widest range of choices, because others in the community don’t know to trust them.

A person with a good reputation may even pay less for products or services because they are deemed to be a lower risk. Though people have multiple trust profiles — often one for each website they use — we may soon reach a point where we have a single profile used across the web, telling other users that we can be trusted.

This article was originally published in Business Spectator

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