Innovation in fintech and achievements

Scaling Customer Account Openings in the Sharing Economy



The Sharing Economy continues to grow rapidly, with estimates that it will increase from $14 billion in 2014 to $335 billion in 2025. Underpinning this growth is a constant chicken-and-egg problem: sharing economy companies need to grow both sides of their “marketplace”.

To establish a consistent framework and terminology for a closer look, let’s give generic terms to each side of a given marketplace.

  1. Provider: This is the “supply side” of a marketplace. It would be the seller at eBay; the merchant at Fulfillment by Amazon; the driver at Lyft; the property owner at Airbnb; the home maintenance provider at Thumbtack.
  2. Consumer: This is the “demand side” of a marketplace. These folks are consumers of the service or good from the provider above.

Onboarding providers — a “heavyweight” process

We have worked with many of these sharing economy companies at Ekata to help in identity verification and fraud prevention, and we have noticed a particular pattern while watching them evolve: they focus heavily on verification of the provider first and foremost. This makes good business sense for a couple of reasons:

  • It’s a waste to spend time and marketing dollars driving demand to the marketplace if the supply side is not already in place.
  • In order to provide a good experience to the consumers, providers need a deeper level of vetting and identity verification. It may also be an employment decision, such as in the case of drivers, where the process falls under Fair Credit Reporting Act (FCRA) requirements to use credit header data with a social security number.
  • The providers also usually represent significantly larger financial risk to the marketplace. For instance, eBay guarantees sellers will provide goods as advertised up to a certain dollar threshold, which is essentially an underwriting decision.

Due to these issues, identity validation and onboarding of providers is what I would call a fairly “heavyweight” process in terms of multiple steps and friction for the provider. Note that the provider is willing to deal with more friction in the onboarding process than the consumer would be, since their potential payback is higher.

Provider onboarding is also expensive in terms of third party verification services, identity data, background checks, and (potentially) credit reports. Companies such as Checkr and the three credit bureaus provide a good service here with very detailed background and credit reports.

We have noticed that this process is relatively mature in most sharing economy companies, since it receives effort and scrutiny very early on.

Onboarding consumers — a low friction, high scale process

The consumer or “demand side” of the equation looks very different at nearly every sharing economy company with whom we work. A few key attributes of consumer onboarding:

  • Building out the demand side of the marketplace requires much more scale. Most sharing economy companies need to onboard 2-3 orders of magnitude (or a thousand times) more consumers than providers.
  • With that scale requirement, marketing departments drive requirements for a signup and onboarding process that offers as little friction as possible.

The problem is that low friction processes allow a lot of riff-raff into the marketplace. Some of these folks are outright fraudsters, but more often they are just creating multiple accounts to take advantage of new signup incentives like free offers. Because no single consumer accounts for significant financial risk, this problem is usually discovered later in the marketplace’s growth, after the problem has become large.

When friction is too low, fraudulent accounts are rampant. But when friction increases, the filtering process can greatly impact consumer signups.

In order to onboard consumers at scale, sharing economy companies need a very low friction, “lightweight” process that filters out a significant portion of the riff-raff without getting in the way of good customers.

This lightweight, low-friction consumer onboarding process has proven to play to our strengths in global identity verification at Ekata.

  • Our APIs are extremely fast, with sub-second response times across all product lines and some responses in the 100 millisecond range.
  • We provide lightweight identity data elements for filtering quickly without friction real-time in the consumer signup process.
  • Our pricing, initially set for transactional risk management in eCommerce, is far more cost effective at scale than the heavyweight providers — at least 10x lower.
  • We are very customer driven and can tune our APIs to specific needs.

We are proud to have strong relationships with customers like Lyft and NextDoor, helping them with their consumer onboarding process. We would love to hear more about the challenges in your process, and work with you to find a customized solution.

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