Building Trust in the Sharing Economy: Who Sets the Rules?

Business is a numbers game. A glance at a glossary of business terminology, full of words like accounts, markets, margins, and profits indicate numbers are the language of business (and in general, the bigger the numbers, the better you’re doing). But what sort of human behaviors and attitudes underlie the numbers which dictate whether a business will be successful or not?

Designing for Trust is a research initiative I’m leading, in collaboration with NewCities supported by Esurance and NestAway Technologies. I’m looking at the importance and various interpretations of the concept of trust in one of the fastest growing business segments in the world: the sharing economy. In particular, I’m exploring the different trust factors in the sharing economy and its impact on behavioral patterns in cities. The goal is to shed light on how government, sharing economy platforms, and end-users can work together to foster trust and improve collaborative consumption.

Why focus on trust within the sharing economy?

For nearly a decade, sharing economy platforms such as Uber and Airbnb have been disrupting traditional industries. But more recently, they have also been raising major policy questions. Around the globe, governments are faced with unprecedented regulatory issues that arise from these innovative sharing services. Taxi drivers have asked regulators to put a stop to what they believe is unfair competition by ride-hailing companies, and residents complain to their local elected leaders that private housing in their neighborhoods should not be rented out as hotels.

“Because sharing economy firms launch so quickly and are so disruptive, they often cause distrust between tech companies and the government, which can trickle down to the community,” Warren Logan, Senior Transportation Planner of the San Francisco Transportation Authority (SFCTA) claims.

Tensions arising between sharing economy platforms and local governments have made national news headlines. In August 2018, San Francisco denied e-scooter and dockless bike-sharing company, Lime, a permit to operate because of its history of launching too aggressively before rules could be established. Further, in 2017, Uber’s license was revoked in London due to a lack of corporate responsibility in public safety and security, including failing to report crimes to the police and conduct proper background checks on drivers. In 2016, Airbnb sued San Francisco over excessively strict registration requirements for its hosts.

But sharing economy platforms also understand trust is fundamental to the success and sustainability of their platforms. After making sweeping changes to its practices, Uber has since received a 15-month probationary license to operate in London. Meanwhile, Airbnb settled its year-long lawsuit against the City of San Francisco, amid rumors that it was planning for an initial public offering (IPO), and agreed to comply with the City’s registration requirements starting in early 2018.

The sudden and disruptive nature of sharing economy platforms has forced governments to play a bigger role in regulating an industry they might not yet understand. In San Francisco, Mr. Logan has spearheaded a new initiative to foster and rebuild trust between the local government and a myriad of mobility sharing economy firms in the county. While these initiatives have been largely successful, our research shows in other parts of the world, many public officials admit that they have not used nor understand the benefits of sharing economy firms. This begs the question of how much of a role should governments play in regulating the sharing economy? And can the third party sector or civil society (neither public nor private sector) step in to help foster trust among the general public, local governments and sharing economy firms?

Certifiably trustworthy?

Amidst the flurry of regulatory activity over the past couple of years, the Sharing Economy UK was created in 2015, as one of the first independent trade bodies representing the sharing economy community. One of its earliest initiatives, the TrustSeal platform, focused on establishing trust between sharing economy platforms and users.

“Trust is fundamental to the sharing economy and must continue to be built and established successfully for both users and providers. The popularity of peer-to-peer transacting and sharing economy platforms show people value their services and feel that they can use them safely. But for the sharing economy to reach its full potential, it must continue to build trust among consumers,” explained Jenna Cane, Manager at the Sharing Economy UK.

The TrustSeal is the world’s first seal of approval to validate sharing economy platforms and is a form of self-regulation for sharing economy firms to build trust with consumers. The seal was created by world-class businesses and sharing economy experts from Sharing Economy UK in partnership with the University of Oxford’s Saïd Business School and PricewaterhouseCoopers, who thoroughly studied the business models of sharing economy platforms. This is especially important because “the trustworthiness of any implementing organization (or rule, taskforce, etc.) is only as robust as the trustworthiness of its individual members and the intentions of whomever brought it into being,” claims sharing economy expert, April Rinne.

The TrustSeal encourages sharing economy platforms to be proactive rather than reactive as it has in the past. It also helps to allay fears of opponents who are concerned about inconsistencies in areas like safety and privacy. Thus far, 10 companies have been awarded the TrustSeal. Sharing Economy UK runs workshops to raise awareness and provide free guidance around the TrustSeal good practice principles.

The TrustSeal is an example of how the civil society, or the so-called “third sector,” can step in to help build trust in a more natural and less hostile manner. While the Sharing Economy UK is the first in the world to deploy such a platform, it hopes others will follow suit as similar sharing economy trade groups begin popping up around the world. Currently, Sharing Economy UK is working with Japan to create its own version of the TrustSeal.

As for the government’s role? Ms. Cane believes the UK government is taking positive steps to support the sharing economy, introducing “sharing economy tax breaks” in 2018. She is confident that governments can play a valuable role, “but they must take the time to learn the business models of sharing economy firms – it’s not a one-size-fits-all solution.”

The role of trust will only gain more attention as the sharing economy grows and expands beyond the popular home- and ride-sharing services. Our research will continue to explore how collaborative consumption can be achieved through trust and suggest ways that stakeholders can actively engage. A report is expected to be released in mid-2019.