insights

Why does collaborative economy not collaborate?

the “collaborative economy” needs to collaborate better

Don’t you feel irritated when your Uber rating suddenly plummets without any apparent reason? Or when you get rebuffed by Airbnb because of ‘unfair’ negative feedback received from a previous host. Maybe you are listing your studio in your member state, and some wally found it offensive that your old clothes were still in the closet, expecting a Hilton-like service.

Nevertheless, if you are like me, you continue to appreciate these 21st-century ways of transactions, enjoy the many benefits they have, and you are always ready to argue in their favour (especially when compared to their conventional rivals).

Opaque algorithms

In traditional trade, a subtle system of institutions, built on public policies, underpin the customer/provider relationship. When it comes to peer-to-peer transactions, however, trust between participants derives from very opaque and complicated algorithms. One could write a book about how they work across various industries. For example, on any given platform, the algorithms are completely different depending on whether you are a provider or the recipient of the service. Furthermore, they have neither been discussed publically nor milled through the EU’s “ordinary legislative procedure”.

If they start working together, collaborative economy companies will realise that their common interest can help them further improve the service and gain social trust.

Licensing and market access obligations

The same logic can apply to licenses or market access obligations. In traditional sectors, they were initially sought to disincentivise potential free riders from entering. However, comparable legal obligations were never proposed by sharing economy actors. Even though the concept of disrupting the market entails in itself that one should not go by the rulebook, the contemporary EU legal system allows for powerful and innovative forms of self-regulation.

Many would use such arguments to castigate collaborative economy operators of the likes of Uber. But I would still argue that all those services transformed our everyday life positively and economically benefited most of us. In 2015, PwC concluded that sharing economy generated EUR 4bn in revenues and facilitated transactions for EUR 28bn. Basically, this means that collectively those economic operators, owning no assets but merely facilitating transactions, formed among the most profitable industries globally.

Fig 1. A cross-industry peer-rating standard

Except that we cannot define the collaborative economy operators as a distinctive industry on its own, or not yet. I certainly believe that if they start working together, similarly to all other well identified industrial sectors, collaborative economy companies will realise that their common interest can help them further improve the service and gain social trust.

Regardless of whether a platform provides you with the means to find a property, a ride, or a warm meal, there are intrinsically common aspects between those transactions. To a large extent, those refer to the responsibilities that the operators must shoulder. At a minimum, they have to guarantee: a trusted transaction, a fairly taxed profit of the provider, and protected rights of the weaker party.

To that end, currently, sharing economy platforms engage individually in public affairs and fight against a “policy status quo” underpinned by member states heterogenous acceptance of the sharing economy business. In this way, they are missing an opportunity, that of using the potential strength of their collective voice. What will transform this industry both in the eyes of the public (especially the more sceptical part of it) and policymakers is a standard action of a responsible sector?

Most certainly, achieving:

  • a cross-industry standardised rating and reputational system (in effect reducing the need for some aspects of consumer protection acquis to be applied);
  • an active promotion of best practices across the EU (de facto identifying measures (or absence of such) which are adequately applied on the member state level and promoting those on EU level);
  • an effective deterrent against “free-riders” (or simply put, an industry-led “seal of approval” system with clear criteria – similar to the UK initiated TrustSeal); will transform this sector and lead to its sustainable future.

On top of that, all of us that regularly use these services, will not be kept in the dark but will feel adequality protected as both consumers and providers of a service.

Fig 2. Promoting best practices on EU level

author

Tomas Dimitrov
Account Manager