Solidifying Digital Identity in the Sharing Economy

The sharing economy is, like many blooming industries, a modern innovation built on faltering foundations. No matter how advanced the technology or platform, if the roots of its security and digital identity verification aren’t sound, it’ll never be able to scale without risking inevitable calamity.

In this article, we’ll take you through three of the biggest use cases for a sharing economy model that could use the backing of third-party verified data in building stable digital identity verification.

1. RideShare

Arguably the first to bring the sharing economy into the mainstream, rideshare services like Uber and Lyft have become household names. Even with their success, though, these companies still face new identity verification issues every other day. Uber was recently fined $8.9 million for allowing drivers with felony convictions, DUIs, and reckless driving records to drive for the company.

The reason so many drivers with criminal backgrounds had slipped through the cracks lies in Uber’s identity verification process. Rather than fingerprinting drivers, which catches those using aliases or false identities, Uber conducted its own private background checks. The company insisted that its private process was sufficiently thorough, but these results suggest otherwise.

Without a third-party verified process in place, services like Uber risk not only regulatory consequences, but consumer backlash as well. When consumers lose trust in a rideshare, it’s an immense undertaking to recover their loyalty.

2. AirBnB

Learning from missteps like those of Uber, AirBnB has already come a long way in security measures from where it first began. In 2013, the company launched a “Verified ID” service to validate the identities of both guests and hosts. Each person who completed the verification process would need to upload two forms of identification:

• Offline Identity: A photo of the person’s driver’s license or passport
• Online Identity: Facebook or LinkedIn authentication

AirBnB would then make sure that a person’s offline and online identities match. This process is certainly necessary in establishing trust in a sharing economy service like AirBnB — after all, you would want to know that someone requesting to stay in your home is a real person, and vice versa.

Unfortunately, simply verifying someone’s digital identity isn’t enough to manage fraud. Guests have reported a growing number of scams, wherein a host would list an address apart from their own, as well as photos of that residence, and then call the guest after they arrived to let them know that the real address was actually a block or two away. Of course, the real address usually turned out to be in much poorer condition than what was listed.

Thus, AirBnB doesn’t only need to verify that someone is who they say they are; the company also needs to verify that someone lives where they say they live. A third-party verified source like utility data would come in handy here, by providing a verified history of utility bill payments for a certain address. A potential fraudster would have to be very committed in order to pay utility bills for an address they didn’t actually live in or own.  

3. Rent-to-Own

Another sector of the sharing economy that has burgeoned in popularity is the rent-to-own industry. High-end items like furniture and equipment are often more affordable to lease for a short time rather than purchase, but such services run high risks of theft carried out by renters. Alert Management Systems’ ID Scan Integration service aims to safeguard against this type of theft by evaluating renters for multiple fraud indicators, including fake IDs and address changes.

CEO of equipment tracking software provider RoviTracker Alain Eav says that protection against theft should be a top-of-mind concern, starting with third-party verified data. “Right now your best defense against any equipment theft is data. The more data, the better.” Having comprehensive data on both the renter and the equipment itself is the only surefire way to ensure that valuable assets are kept safe.

Utility data, for instance, can add a layer of trust to the digital identity verification stack. If someone can prove with their utility payment history that they’ve been living at the same address for several months, it stands to reason that they’re less likely to abscond with expensive equipment at a moment’s notice.

Solidifying Digital Identity Verification

Digital identity verification is a nebulous framework to navigate, but it’s absolutely pivotal to get it right in a sharing economy model. None of the relationships built in a sharing economy will last without a foundation of trust, and that trust blossoms from using verified data to confirm that the people engaged on either side of every transaction are real and honest citizens.

Have you seen a good example — or a fumbled example — of digital identity verification in the sharing economy? Tweet at us and let us know!

You might also be interested in:

• Improving ID Verification for Alias-Based Transactions
• SlideShare: Who’s Who? ID Verification in a Digital World
• Defense Against the Dark Arts of Synthetic Fraud in Auto Loans

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