Building a Smarter Sharing Economy with Background Checks
September 30, 2014
It’s nice to share. At least that’s what we learned as kids. But for some people, sharing is more than just nice—it’s a way to make a buck. I’m talking about the sharing economy, which Forbes estimates at $3.5 billion this year, with growth exceeding 25%.
For the uninitiated, in very simple terms, the sharing economy is a model where you loan out your stuff for a fee. It’s access over ownership. And the more we experiment with sharing as a business, the more participants are challenged by legal concerns, regulation, and operational details. Since one of the basic tenants of sharing is trust in the person and the product being shared, it’s time for some segments of the sharing economy to adopt a process that other business models have already embraced and acknowledged as a necessity—I’m talking about background checks.
What is the Sharing Economy?
To understand why some sharers need background checks, let’s take a step back to define the business model. Sharing, or collective consumption, is where participants share access to products or services, rather than having individual ownership. If you think about it, the concept is not entirely new—we’ve been renting movies, hotel rooms, and borrowing books from libraries for years. The new twist is technology. Most of the new sharing models are built on web platforms powered by social networks that bring buyers and sellers together. Another difference is an increase in person-to-person exchanges. Today’s shared marketplace involves thousands of individual owners renting out what they own. Sometimes the network is managed by a central hub that serves as a network. You’re probably already participating in this segment of the sharing economy. If you’ve ever used Uber, Lyft, or Airbnb, you’re doing it. Lending Club, and time banks are other models. The benefits of sharing are obvious—as the New York Times put it, here, sharing offers a chance to “live light, waste less, protect the environment, to create and associate with a community of like-minded people, a way to de-clutter and save money”. So what’s the harm in sharing? You wouldn’t think twice about crashing at a friend’s apartment or sharing a ride to the airport with a friend—or even a friend of a friend. But as the network of buyers and sellers expands beyond your inner circle of trusted friends, how do you know what you’re getting? Here are three reasons why running a background check makes sharing even smarter.
When you hop into a cab, you know that the driver is part of a regulated, licensed industry. The cars are inspected and must meet some minimum standard of serviceability. Criminal background checks, driving record checks and license verification are all part of the screening process for taxi drivers. On the other hand, rideshare drivers drive their own cars, are responsible for their own insurance and maintenance, and fall outside of traditional regulation. It’s no wonder that cabbies are going ballistic, crying unfair competition. Consumers love rideshares because they’re convenient and cheap. Pundits can debate on the benefits of this new type of competition, but for the consumer, the basic question is this—is ridesharing safe? Uber has faced an onslaught of criticism for performing low quality background checks, and its drivers have been linked to illegal drug trafficking, abductions and even death. In February, Uber announced that it would be expanding its background checks to include federal and county records. Other ridesharing businesses should take note. Some cities are rejecting rideshares and other shared businesses out of concern for public safety and lack of regulation. On July 30, Salem. Oregon city officials sent Uber a letter warning that anyone offering a ride for money in Salem must obtain the same licenses as taxi drivers. Officials in Salem are also concerned about home-sharing, and the city has issued a warning to residents listing their spare rooms on Airbnb and VRBO without proper permits. According to city officials, those citizens are breaking the law and posing an unreasonable risk to public safety. Salem is not alone–for a list of other cities looking at stricter regulation of sharing, look here.
2. Reliability and Quality
When you hire a dog-walker or pet sitter through an agency, you expect the person to have been vetted (no pun intended). You want to make sure that the person you hire to take care of Fluffy is going to show up on time, knows what she’s doing, and is reliable. A background check would ensure that the service provider has the stated qualifications, track record and experience. Some sharing networks clearly see the value of trying to set quality standards. If you look at TaskRabbit, a peer-to-peer marketplace for personal services, it has a four-step vetting process for its new “rabbits.” There’s an identity check, a criminal background check, an in-person interview and training. I can’t vouch for the quality of the background check, but the process at face value seems like a step in the right direction. Services that are getting it right will be rewarded by positive social media chatter, good reviews and feedback. Consumers will ultimately opt for the services that have higher standards.
3. Legal Accountability
Things go wrong. Because the sharing economy is new, there are legal gaps that put users at risk. Some of those gaps could be mitigated by background checks. Room sharing and lodging exchanges are a good example, possibly for both the renter and owner. Airbnb does not perform background checks on users, according to their website. To protect owners, it does offer a free “Host Guarantee” which will reimburse hosts for property damage. Airbnb horror stories abound—just ask the homeowner who found meth pipes lying around when they returned. A background check on users would provide some assurance that the person you welcome into your home is legit. On the other hand, if you are a renter on Airbnb, it is truly “buyer beware.” There is no guarantee for your physical safety during your stay, or even that the host of your temporary lodging is the actual owner. Your host might actually be violating a lease. There’s no requirement that hosts carry insurance. The safeguards for users are simply the ratings and rankings on social media. If I rent a room at the Hilton, I know what I’m getting. If the elevator breaks or if a staff member harms me, I can hold Hilton accountable. I’m pretty sure Hilton is insured. But if I’m renting from an individual home owner on a room-sharing site, a background check would create a base level accountability in the event that the stay ends in a dispute, or even worse, in injury.
In the End, It’s All About Trust
The success of sharing boils down to this: you have to trust the system. The opposite of trust is fear. And fear is bad for business. Sharing is successful only if you can trust that the service or the product is safe, will meet your needs, and is sound. Trust is about reputation. In an economy that grew out of relationships and social networks, the ability to rely on user reviews is great. But sometimes the need for independent verification is necessary. Consumers want some level of confidence that they will get what they paid for. Background checks can provide a documented and neutral means of qualifying both buyers and sellers in the sharing economy. For the cost of a background check, users on both ends of the spectrum can improve the experience and create a level of commitment and credibility that leads to trust.
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