Why Identity Verification is Essential to The Gig Economy

The gig and sharing economy are two distinct but related economic models that have gained prominence in recent years. Whereas the sharing economy is a system where individuals or businesses share their underutilized assets, the gig economy is a labor market characterized by short-term, freelance, or on-demand work. Both are driven by technology and have transformed how people work, travel, and provide services.

The remote nature of these economic models relies on trust between parties that have never met in person. To overcome potential fraud, gig economy identity verification tools have emerged to help participants prove their identity. In this article, we look at the benefits of digital identity verification and the methods used to achieve it.

Understanding the sharing economy and gig economy

Participants in the sharing economy offer assets such as cars, homes, or equipment for hire to the general public for a fee. This model is facilitated through online platforms such as Airbnb and Uber, which serve as a middleman between providers and customers.

Similarly, the gig economy is facilitated through gig platform companies like Fiverr and TaskRabbit. Gig workers in the gig economy search these platforms for individual tasks or projects that suit their skills and agree on a fee with the advertiser. 

Examples of this work include tutoring, web design, and freelance writing. By the end of 2023, global gig economy transactions are expected to reach $455.2 billion. 

Both the sharing economy and the gig economy are driven by technology and rely heavily on trust amongst participants. To facilitate this, initial ID verification tools are paramount to ensuring all participants enjoy adequate security. 

The importance of trust in sharing economy apps

Trust plays a central role in creating a sense of security and reliability for providers and users in the sharing economy. Unverified or anonymous users increase the risk of scams, identity fraud, or criminal behavior because they can’t be traced or held accountable for their actions. 

For instance, an unverified taxi driver threatens a vulnerable passenger traveling alone; likewise, an unverified employer could easily leave a contractor unpaid. This creates an unsecured environment for providers and users, leaving participants less willing to engage with a platform.

While identity verification has come a long way to combat this risk, fighting online fraud remains a significant challenge to the industry. To continuously re-enforce trust, platforms must actively combat fraudulent account takeovers, restrict account sharing, and optimize verification processes by adopting new technology in this rapidly evolving sector. Users must be assured their online accounts are secure if they’re expected to engage in financial transactions on a platform.

Key benefits of identity verification

Implementing robust identity verification offers several advantages, from consumer safety and fraud prevention to regulatory compliance and a better user experience. Let’s dive into them.

1. Consumer safety

Identity verification confirms that the person behind the screen is who they claim to be, reducing the risk of malicious activity. Users feel more secure when they know that all participants on the platform are genuine and accountable.

2. Fraud prevention

Identity verification is an effective deterrent against activities such as fake accounts, scams, and identity fraud. It acts as a barrier to entry for fraudsters, making it more challenging for them to exploit the platform.

Identity verification facilitates adherence to legal and regulatory requirements, including know-your-customer (KYC) and anti-money laundering (AML) regulations. This safeguards the platform from legal issues and ensures user data is handled responsibly.

4. Improved user experience

Identity verification can streamline the onboarding process, making it quicker and more user-friendly. Verified users appreciate a seamless experience without restrictions and limitations, leading to greater satisfaction. This encourages users to engage more on the platform, leading to a richer and more rewarding experience.

Common methods of identity verification

Identity verification methods fall into two main categories: user-provided information and third-party verification services. Here are some common methods with real-world examples.

User-provided information: Email verification

Users provide an email address, and the platform sends a verification link or code to that email. Users must confirm their email to complete the registration. Most online platforms like Facebook use email verification during account creation.

User-provided information: Phone verification

Users enter their phone numbers, and the platform sends a verification code via SMS. Users need to enter the code to verify their phone number. Ride-sharing services like Uber use this to confirm users’ identities, ensure safety, and provide transparency.

User-provided information: ID verification

Users upload a government-issued ID, such as a driver’s license or passport, and the platform verifies the information against the document. Airbnb often employs ID document verification for hosts and guests to enhance trust and security.

Third-party verification services: Social media verification

Users link their social media accounts to the platform, allowing the platform to verify their identity through their social profiles. Some dating apps like Tinder allow users to connect their social media profiles for identity verification.

Third-party verification services: Bank account verification

A platform can verify identity by linking a bank account by confirming the account holder’s name and other details. Peer-to-peer payment platforms like Venmo and PayPal often verify users through their linked bank accounts.

Third-party verification services: Business verification

Companies may need official business documentation to verify their legal entity and ownership of online business accounts. Platforms offering business services, like Amazon Web Services (AWS), require businesses to submit legal documentation to verify their identity.

Case study 1: Netflix

Netflix, a leading video streaming service, has implemented two identity verification measures to combat account sharing. “Profile Lock” allows account owners to set a PIN for their profiles, preventing unauthorized users from accessing specific profiles within the same account. 

The use of two-factor authentication (2FA) ensures that even if someone has the account login details, they need to provide an additional verification code sent to the account owner’s email or phone to access the account.

Case study 2: Major League Baseball

Major League Baseball (MLB) is testing identity verification measures to tackle account sharing in the context of ticketing and event access. They hope to transition entirely to mobile ticketing, where dedicated apps deliver tickets to fans’ smartphones. 

To enter the stadium, fans must present their digital tickets within the official app, often utilizing fingerprint or facial recognition for identity verification. Additionally, MLB teams have explored geolocation and Bluetooth technology to ensure the person with the ticket is physically present at the venue, thereby deterring ticket sharing and scalping while enhancing overall security.

The centrality of identity verification in building trust within the gig economy

Identity verification is fundamental to the sharing and gig economy. It provides security, fraud prevention, legal compliance, and an enhanced user experience. Gig economy platforms need robust identity verification procedures to instill trust and confidence.

Operators in these sectors must prioritize trust and safety, which is key to attracting and retaining users. As gig economy identity verification evolves, advanced biometrics and alternative technologies like blockchain will likely emerge. Addressing new challenges related to data privacy and changing regulations will also be crucial to further development.

Why choose Microblink for identity verification

Microblink is on the cutting edge of identity verification technology, developing AI-powered ID scanning tools to optimize conversions and prevent fraud.

Feel free to get in touch if you have any questions or want to discuss a potential future collaboration.

November 20, 2023

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