TECHNOLOGY AT WORK

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Citi GPS: Global Perspectives & Solutions February 2015
The Sharing Economy
Benefits of the emerging sharing economy
are not showing up in productivity statistics,
but they are real
While productivity is at the heart of long-run growth, consumer surplus is arguably a
better measurement of the benefits to societal progress. Thus, even though much of
the emerging sharing economy is not captured by productivity statistics, its benefits
to most people are certainly real: Wikipedia, Google, Facebook, LinkedIn, Instagram
and Dropbox all contribute to the sharing economy, and they are all available for
free. As the sharing part of the economy is likely to continue growing as a result of
digitisation, consumers along with talented entrepreneurs will be the greatest
beneficiaries of the digital age.
The opportunities offered by the digital economy are immense as the Internet and
smartphones make it cheaper to match supply and demand. People can now
register their unused assets on various online platforms, connecting owners and
users. Satellites and smartphones even make it possible for consumers to locate
services nearby.
This is the idea behind a range of online services that enable people to share cars,
accommodation, car-parking spaces, bicycles, musical instruments, garden
equipment, household appliances and other items. Such peer-to-peer rental
concepts can provide additional income for owners, while providing cheaper
alternatives to consumers.
The most prominent sharing service is probably San Francisco-based Airbnb,
allowing users to rent out their vacant rooms or homes to travellers around the
world. Recently valued at $10 billion and with reported revenue of $250 million last
year, the company shows how beneficial the sharing economy can be to talented
entrepreneurs. Yet the benefits to consumers are equally substantial: the platform
reached 10 million transactions last year in 192 countries.
The way Airbnb provides cheaper accommodation, car-sharing concepts provide
new alternatives to commuters. While some companies, such as Buzzcar and
RelayRides, offer peer-to-peer car-rental services allowing consumers to use
somebody else’s car for a fee, there are now also taxi-like services. 124 Companies
like Uber use smartphone apps with satellite location to connect drivers and
passengers, and provide a cheaper alternative to traditional taxi companies.
The sharing economy is not merely the
result of digital technologies, but also from
clever ways to build trust
The rise of the sharing economy is however not merely the result of digital
technologies connecting people: it is as much a result of how they can be used in
clever ways to build trust. A decade ago, when eBay started, people were still
hesitant to provide things like their credit card details to online marketplaces. That is
no longer a major obstacle. Secure Internet payment systems have been crucial,
but also transparent rating systems. Home owners that register on Airbnb offering
accommodation to strangers rely heavily on users’ past ratings, and travellers
staying in a strangers’ flat can read reviews from previous guests. In addition, some
services integrate Facebook, allowing users to check if they have mutual friends.
The sharing economy still has much more potential. Governments could start
unlocking some public assets, like publicly owned vehicles, providing benefits to
communities as well as tax payers. Furthermore, as the sharing economy allows
people to access more things cheaper or even for free, leisure may also become
more attractive.
124 The Economist (2013).
© 2015 Citigroup