cc @PeerIndex Reputation Enhanced Lending and Trading Becomes Mainstream by Assistant Vice President, Strategy Tim Morey
The recession, coupled with the rise of the so-called Collaborative Consumption or Shared Economy, has the early–adopter community abuzz with notions of the end of consumption. Companies like AirBnB and Zimride that allow people to open their homes or their cars to share or loan for a fee are cited as examples of new ways of using and exchanging goods and services. But the really interesting trend here is that new forms of trust are being enabled by social networking technology. We all joined Facebook and LinkedIn to stay in touch with colleagues and friends, but the upshot of mass adoption is that we can check up on virtually everyone we come across. Individuals who have never met or transacted with one another are using social networks to validate each other. If you are just selling goods on Craigslist, it doesn’t really matter whether the buyer is a good person or a bad one: I take the cash, you take my goods, and you are gone. But if I am renting something to you, trust becomes critical. I want to know that you are not a crook, or a thief, or a bad egg. By linking person-to-person transactions to social networks, we are reducing the need for cash deposits and other financial remedies to the bad egg problem. While logging into third party websites using your Facebook identity is now commonplace, we are beginning to see person-to-person exchanges making use of social networks to broker trust. For example, before you stay at someone’s spare bedroom via AirBnB, you have to sign in with your profile. I recently rented someone’s house in Toronto for a few days, and between our respective social networks we found enough friends, relatives, and colleagues in common for him to lend me the property with confidence. In 2012, this reputation enhanced lending and trading will become mainstream. We will lease, barter, and trade with relative strangers, banking on their reputation and connections.
