Navigating personal identity & managing risk
by David ThomasMr. Thomas is CEO and founder of Evident ID. Visit www.evidentid.com
Part II in a three-part series. In Part I, we established the emergence of the Gig Economy, as sharing and digital marketplaces increasingly integrate into our lives, such as Airbnb & Lyft. Read Part I here.
Providers Offer More Sophisticated Services
While it’s true that platforms like Lyft and Airbnb have seriously shaken up the transportation and accommodations markets, gig work isn’t limited to ridesharing and roomsharing. Nor is it only about finding someone to do the household chores that you don’t want to do. The gig economy is diversifying: “[i]t also includes high-end, specialised services such as graphic design, business consulting and medical services….Think of a gig worker as a tiny, one-person company, responsible for creating his or her own personal HR department.” Digital platforms allow vendors with a variety of services to connect with consumers, market their product or service, and garner positive reviews—thus perpetuating the business cycle. The gig economy isn’t limited to creatives, either. Upper level management roles are becoming available in job sectors typically dominated by traditional employment: “finance, accounting, and IT.” The use of gig workers gives companies flexibility: they can search out talent to meet needs as they arise.
The desire for flexibility and variety—as well as the decrease in long term job stability in the current markets—has prompted the creation of platforms for highly skilled independent consultants to connect with companies that need their skills. It simply isn’t feasible to collect and maintain a variety of subject area experts in house. The gig economy allows companies to address specific needs—market analysis or scientific research —without taking on additional permanent employees. This outsourcing of senior level executive talent is a trend that is projected to continue, in the vein of the work begun by The Stem and PwC’s Talent Exchange.
The sharing economy allows both consumer and commercial interests to demand more: more innovation, more creativity, more return on investment. While the sharing economy began as a primarily peer-to-peer enterprise, more B2B collaborations are popping-up. Both GE and Fischer-Price have sought partnerships with Quirky, the digital platform for inventors. This move allows a fresh stream of innovation, refreshing the brand and, potentially, reinvigorating the market.
While it’s true that many digital platforms began as a sort of rebellion against traditional brands, some (like Airbnb and Lyft) now garner brand recognition in the sharing economy that mirrors the brand recognition of their traditional counterparts. Ultimately “brand still matters in the collaborative (sharing) economy. The rise of on-demand technologies doesn’t change the fact that brand recognition and market dominance are still closely related. In fact, across all age groups, brand is as important as convenience.” For instance, Airbnb dominates the accommodations sharing economy with a market share of 55%. The second largest chunk of the market share goes to the similar, yet lesser known, VRBO—at 29% market share. Similar services, vastly different brand recognition and market share.
Reputation and Its Impact on the Gig Economy
Reputation carries immense weight in the gig economy. In fact, reputation serves as the primary factor in choosing both a digital platform on which to engage and service provider with whom to interact. Such a heavy reliance on reputation alone understandably carries with it some significant flaws.
The first flaw lies in the conflation of the platform and the transaction partner—the person who is actually providing the service. If you have negative feelings about the rate that TaskRabbit charged to install your flat screen TV, for instance, you are more likely to score their installer lower than warranted based on performance alone. Therefore, this conflation of platform and provider negatively impacts the provider’s reputation.
Reputation can also skew both pricing and completion of sale. Studies indicate that buyers will pay higher prices for goods and services based on the individual seller’s higher rating. Positive feedback also has a positive effect on the probability of sale. In other words, a seller with a higher reputation score on Etsy commands a higher price and is more likely to complete the sale than a seller with a lower reputation score. Even the way that users obtain reputation scores may be flawed. Consumers seem to be more inclined to give positive reputation scores than negative ones: “[a] 2001 paper indicates that 99.1% of comments left by buyers were positive, 0.6% were negative, and 0.3% were neutral.” While this feel-good aspect of the sharing-economy seem positive, it also artificially inflates reputation scores that then drive up price and completion of sale.
The difficulties created by reputation scores can be mitigated in several ways. Platform interventions may be established, which evaluate sellers/ providers on independent criteria before they
are permitted to participate on the platform. This method also accounts for difficulties in the reputation score system for users who have few reviews (or none at all) because they are new to the platform. Platforms may also institute a guarantee system of sorts to protect consumers, which may vary from platform to platform. For instance, Airbnb carries insurance to protect platform users in the event of dangerous conditions or accidents on a provider’s property. These types of systems lessen negative impact on the user if things go awry, which may increase consumer confidence.
Platforms may also begin to rely on a verified identity to establish consumer trust and to bolster information garnered from rating systems. In fact, it has been argued that “[v]erifiable identity is absolutely essential to building a reputation system.” While none of these measures completely negate the pitfalls of reputation systems, they certainly provide a more balanced and, therefore safer, venue for consumers to make educated choices regarding sellers/providers. The evidence adds up in favor of verifiable identity for online platforms: the more the consumer knows, the more likely they are to trust. And trust leads to higher profits and a higher rate of completion.
For the sharing economy to thrive, 7 key problems must be addressed
Consumers embrace the sharing economy for the freedom of choice it offers; using a digital platform means consumers are no longer tied into big conglomerations, but instead deal directly with peer-providers. The sharing economy also gives consumers power by allowing them to participate in a rating system that influences providers’ reputation ratings. Coupled with this additional freedom and control is an inherent level of risk. While digital platforms have taken some measures to alleviate that risk, the most effective risk-mitigation factor would be the requirement of a verifiable online identity for participants in the sharing economy. However, before verifiable online identity can truly take hold in the sharing economy landscape, there are barriers that must be addressed:
Online identity verification creates friction. The sharing economy’s appeal lies in its ability to camouflage itself into daily life. To be effective, a good online identity system needs to be invisible. Lengthy or intrusive onboarding will stop a would-be participant experience in its tracks. Seamless onboarding, on the other hand, drives home real, quantifiable results: “companies that focus on providing a superior and low effort experience across their customer journeys . . .realized positive business results, including a 10-15 percent increase in revenue growth and a 20 percent increase in customer satisfaction. As verifiable online identity finds its place in the sharing economy, it must be driven by a seamless, consumer-friendly onboarding process. Otherwise, the process will simply lead to abandonment during the onboarding process, which is counterproductive for platforms, providers, and consumers.
- No single definition of online identity verification exists
Most people’s comfort level extends to offering their identification at banks or airports as a security measure.39 The same does not hold true for online environments. While traditional identity verification is a relatively standard process, online identity verification is definitely not. Users currently don’t know what information is necessary for verification purposes or how that information enhances their online security.
Currently, the onus falls on each sharing economy platform to decide what components to include in the identity verification process; they then are faced with determining which components need to be outsourced and which can be developed internally, weighing the risks to find the appropriate cost versus performance balance.
- Identity verification processes change by the moment
In the dynamic sharing economy, fresh players and segments continue to appear almost daily. Identity credentials constantly change. The challenge becomes creating practices and guidelines that remain current and protect against increasingly sophisticated ways to forge identity. In this dynamic environment, the refrain becomes “is this the most up-to-date data?” Trying to stay on top of these changing processes can drain resources—employee and financial.
- Online identity requires a tremendous amount of personal data
Personal data often includes a person’s full name, Social Security Number or credit information, as well as a secondary source like date and place of birth or mother’s maiden name. Currently, to many consumers’ dismay, online identity verification measures require a good deal of personal data. Companies collecting data face a host of unnecessary risks and potential liabilities. Although security measures are evolving, securing personal data against hacking—which could cause serious damage to the consumer and to the company’s reputation—remains a significant concern.
- Identity verification actually reveals very little about a person’s qualifications
Information currently collected to establish identity doesn’t tell the consumer anything about the provider’s qualifications—like professional licensure or certificates. Currently, review based scores serve to establish peer-to-peer trust. But those scores can be easy to manipulate. For the identity verification process to be truly useful, it needs to be differentiated based on the sensitivity of the service being offered. For instance, accepting a ride from a Lyft driver requires one level of identity verification—is the driver who she says she is and does she have a clean driving record? Scheduling an appointment with an online health professional requires another level of identity verification entirely. Now the user needs to be able to easily ascertain not only the provider’s identity but also that they are a licensed, credentialed medical professional.
- Online identity verification is complex and requires constant re-verification.
Companies working to grow a vibrant user base must constantly show proof of verification of identity for an ever-shifting user and consumer base. Unfortunately, verifying identity isn’t a one-time process. Identity verification must be established and re-established on recurring basis. These efforts often require large amounts of time and financial resources and leave companies vulnerable to events that could seriously damage their brand-reputation.
- With the sharing economy positioned to double in size every year, online security and privacy regulations are becoming more complex and thorough, particularly in industries that require large amounts of personal data
Fundamentals like full name, date of birth, and home address must already be verified. Beyond the fundamentals exists a wide variance in the number and type of data sources engaged to confirm someone’s identity.41 The rapid growth of digital marketplaces means that companies must be up to date with a wide range of security and privacy regulations, including legal compliance with HIPAA, FCRA, CIP, and the Patriot Act . The constant push to obtain personal data for verification unnerves even the most web savvy customers and providers. Nagging questions about who is storing the data, how it will be used, and—ultimately—by whom make users skittish. Additionally, the constant ask for personal data produces friction in what should be a seamless process. Friction pulls users out of the instantaneous experience that they seek on a digital platform. And friction causes drop-off. Meanwhile, companies managing sharing economy platforms must wrangle with crucial decisions about collecting, maintain, and verifying online identity for their users. These decisions could well impact the viability of their company—and the security of thousands of their users.
- Current personal data practices create an environment that breeds internal threats
Companies can, and do, invest billions of dollars in keeping personal data safe. However, even the best technology cannot eradicate the threat that stems from employees having access to users’ sensitive personal data. Employees assigned to process background information for users and providers have open access to personal data. The best encryption system doesn’t block against the employees who have access to personal data as part of normal course of business. Currently, organizations simply must trust that these employees won’t be swayed by bad-actors who offer monetary reward for the distribution of personal data. Even intelligence agencies haven’t been able to solve this issue—as evidenced by multiple major releases of information by insiders.
Although challenging, these seven key problems are certainly not insurmountable. What is required is a fresh perspective on managing personal identity, so that the sharing economy can realize its full potential.
In Part III: Potential solutions to managing personal data.