COMMENTARY: Overcoming Complex Payment Challenges in the Platform Economy

With the popularity of sharing-economy models, payments have become infinitely more complex. Sharing platforms certainly provide more value to consumers than pure-play, single-merchant-owned e-commerce sites, but they come with more challenges. 

By 2021, the platform economy will welcome over 86 million users. That means that all over the world, 86 million strangers will be sleeping in one another’s houses, riding in the backseat of one another’s cars, or even wearing one another’s clothes. 

The sharing economy continues to grow because of the way it allows people to maximize what they have. For sellers, this means monetizing their assets. For buyers, this means making their dollars stretch. For example, booking a vacation-rental home provides supplementary income for the homeowner, while making travel more affordable to the renter.  

As years go on, people will find more assets to share, be it lawnmowers, boats, or baby gear. This means that even more strangers will be transacting with one another. And they’re totally fine doing so, as long as they’re getting paid. 

People trust the strangers they transact with presumably because they trust the platform they found them on. They also trust that they can pay and be paid in their methods of choice. However, there are some complexities and challenges in this model that companies need to be aware of. 

A top challenge is verifying sellers. More and more people are listing their products and services for sale via sharing platforms. This invites fraud and the ability of bad actors to receive payment for products and services that don’t really exist. 

AirBnB, a leading vacation-rental entity, recently experienced significant problems that resulted in a shooting at one of its rentals and reports of scammers taking advantage of travelers. AirBnB’s response is that it will be verifying every one of its property owners.  

Onboarding millions of unknown sellers in various countries requires complex industry-specific knowledge and local data integration. This should be done through payment technology that is able to identify users, based on big data, and flag any suspicious parties or patterns.  

There are other issues. Buyers of products and services need to receive the expected value from their purchase. But in the sharing economy, the product or service isn’t owned by the platform, and therefore quality is harder to ensure. When the product or service fails to meet customer expectations, customers will charge back the purchase and the seller will not receive its funds. 

To avoid this process, sellers and the sharing platforms need to properly represent their products and services to the buyer and provide the correct terms and conditions in the checkout process. 

Another issue concerns currencies. The sharing economy is global in nature, with sellers and buyers purchasing all over the world. A seller may have a service or a product in Brazil, and the buyer may be in Florida. The buyer wants to understand how much he or she is paying for the product and service and the seller wants to get paid in his or her currency. Both want to minimize costs. The sharing platform must have the ability to provide buyers the currencies they want to pay with as well as the ability to pay the seller in the currency of their choice.  

Yet another of the major challenges with platforms today is balancing the customer experience with security. To put it most plainly, customers are fickle. They want to know their payment information is secure, but they also want to be onboarded instantly, without having to fill out a huge application. 

In the short-term vacation-rental industry, there are certain data elements that are very important to determine reliable buyers and sellers to create trust for all of the players on the platform and mitigate risk for the marketplace itself. These data elements for the industry should be identified only through statistical analysis and billions of transactions through the platform. This, coupled with third-party data, provides the framework and infrastructure to create trust. 

Each vertical industry has these specific requirements. Proper identification of these elements and their application into the platform is required for optimal performance.

—Sanjay Saraf is chief technology officer at YapStone Inc., Walnut Creek, Calif.