How the sharing economy impacts our societies beyond online service marketplaces.
Many experts focus on how the sharing economy, powered by the new technologies, has transformed business practices in many industries, especially services. Others highlight the mechanisms of trust at work on a digital platform. Mölhmann and Geissinger, for instance, examine how trust is mediated by peers in the context of the sharing economy.
Trust is one of the core elements of the service marketplace ecosystem. Online marketplaces seem to have gone one step further. Are they now leading the transformation of the norms, rules and moral codes of our societies?
In this article, we’ll focus on how platforms have created a new kind of trust: digital trust.
2. What is trust ?
Uncertainty and risk mark all aspects of our lives. Nobody can foretell the future. Life, however, is a perpetual call to action. This is why humans have invented ways to circumvent chance and have some kind of hold on time.
A promise, for instance, creates a reason for future action. It draws a bridge between two separate islands of time. Much in the same way, trust is the attitude of expecting good performance from another party. It is a wall, never to be breached.
Trust is “the willingness to be vulnerable to the actions of another party, based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party”.
In service e-commerce, trust is fundamental for transactions to flourish. Sociologists have shown that, in the context of the sharing economy, trust cannot be reduced to the use of reputation systems alone.
3. Digital trust
Trust weighs more heavily on the digital service industry than on any other industry. Humans provide services for other humans. No matter how far back you go into time, or how far in the future, trust works on two levels: interpersonal and institutional.
Interpersonal and institutional levels of trust
The first level of trust is interpersonal. It concerns two individual parties: a service provider and a service asker, matched by an algorithm. A service asker needs to determine whether a service provider is reliable –that is, trustworthy. Trustworthiness lies on the service provider’s ability, benevolence, and integrity while performing a service.
The second trust level is institutional. It concerns all the intrinsic regulation and rules governing a service marketplace. In this context, the parties involved are interconnected and interact. If trust is given to the platform provider, then it is easily given to other sharing peers. This is called the spill-over effect.
Circles of trust
Trust spans across relationships, forming a node some call radius or circle of trust. There are in fact several circles, all spanning from a core circle: our family and friends. Trust in technological systems lies in the outer perimeter of the trust circle.
Research has shown some interesting findings. At first, digital marketplaces seemingly revolutionize trust systems. In fact, digital marketplaces tend to make us revert back to what historically corresponded to our innermost circles of trust: that of our family and friends. Such circles are formed by like-minded people sharing a joint identity.
This trust mechanism, called homophily, consists of building trust on common characteristics.
4. Digital trust features
In their well-known work, Platform Scale, Sangeet Paul Choudary and Geoffrey G. Parker have collected the main features platforms have developed to ensure trust. They’ve called them the 7c’s:
- Confirmed identity. Trust is built by reducing the users’ anonymity. The higher the interaction risks are, the more important it is to confirm the participants’ identity to encourage interactions.
- Centralized moderation. It is the simplest method to implement trust in the early days of the platform, but it is also the least scalable source of trust creation. As the community scales, the platform must decentralize trust creation mechanisms.
- Community feedback. By far the most scalable mechanism for creating trust. Community feedback may take several forms, such as comments, votes, ratings, reviews or replies, allowing the community to regulate itself while reducing overhead for the platform.
- Codified behaviors. They refer to an informal type of platform institutionalization. Usually in the form of algorithms, implicit rules enable the platform to nudge producers and consumers toward desirable actions and away from undesirable ones.
- Community Culture. Platforms use culture to foster personal interactions, hence building trust.
- Completeness. Users trust platforms that have complete user profiles and detailed information.
- Cover. It provides the producers and consumers with the assurance that they will be protected financially if they were to participate in a risky interaction.
Trust is crucial to ensure harmony in a digital marketplace ecosystem, all the more so in service marketplaces. It is built over time and is essential to platforms because they ensure the repeatability of actions.
Not only has the platform economy transformed the way we make business: it is also changing the way we interact with our peers. Unless the kind of service performed is personal, the service provider and the service asker are, in fact, unlikely to meet face to face: the emergence of telemedicine, for instance, is proof that this trend is growing stronger.
The vision of the new era, as depicted by TechCrunch, may appear gruesome to some. “In this new world, our ‘trust score’ will be the only metric that people need in order to make decisions on how to do business, and with whom. It effectively becomes the new credit score.” In algorithms we trust.
On a more positive note, the sharing economy has created a shift of values: we are prepared to trust our lives in the hands of complete strangers. This is only thanks to the codification of reputation, influence and status.
All in all, the digital age is working towards the commoditization of trust.
Blackburn, Simon. “Trust.” The Oxford Dictionary of Philosophy, Oxford University Press, 2008.
Choudary, Sangeet Paul. “Trust Drives Interaction.” Platform Scale, Platform Thinking Lab, 2015, pp. 197–202.
Fisman, Ray, and Tim Sullivan. “Everything We Know About Platforms We Learned from Medieval France.” Harvard Business Review, Mar. 2016. hbr.org.
Huurne, Martin, et al. “Antecedents of Trust in the Sharing Economy: A Systematic Review.” Journal of Consumer Behaviour, 2017.
Möhlmann, Mareike, and Andrea Geissinger. “Trust in the Sharing Economy: Platform-Mediated Peer Trust.” The Cambridge Handbook on Law and Regulation of the Sharing Economy, Cambridge University Press. Accessed 4 Dec. 2018.
Stan, Adriana. “The Future Is the Trust Economy | TechCrunch.” TechCrunch, 2015.
At Cocolabs we’re working on the standardization of services. We build custom service marketplaces. Each new project is an opportunity to further our reflection and refine our understanding of what is at stake: human interactions set in a given time and space dimension.