As Sharing Services Face Backlash, Payments Takes A Bigger Role

Payments' Bigger Role In Sharing Economy

Here’s some advice for your next, or first, trip to New Orleans (home of the PYMNTS Bureau of Crawfish): If you happen to be staying in an Airbnb and want to get in good with the locals, maybe just tell them you are staying in a hotel.

New Orleans is the site of one of the most significant and ongoing backlashes against the sharing economy, a global trend that probably won’t kill off Airbnb and other major players, but could create more hassles and pressures for some companies struggling to make it in this big, crowded market.

The backlash goes beyond rooms, apartments and houses to include instruments of transportation, which is among the latest areas of the digital economy to come under the scrutiny of politicians and regulators. At the same time, payments technology is advancing in the shared economy world, providing a counterforce of sorts.

Sharing Backlashes

In New Orleans earlier this year, city officials banned short-term rentals of homes “in historic residential neighborhoods, (with) none at all (allowed) in the Garden District and the French Quarter,” according to a local news report.

Proponents of the ban said such rentals contribute to higher rents for locals and an overall lack of affordable housing. Opponents said short-term rentals such as those offered via Airbnb help bring more tourism dollars not only to the city at large, but also to neighborhoods that tourists might not otherwise visit otherwise – resulting in local property owners getting a cut of that tourism pie.

Similar backlashes are playing out elsewhere – and not just for rental property.

Shared scooters have functioned as a reliable source of controversy as transportation transitions into more of a service offering. Among opponents’ main concerns? Storage of scooters along sidewalks, and potentially too many scooters getting in the way of pedestrians, bikes and even automobiles in crowded urban centers.

Those controversies have notably played out in San Francisco, though other cities, including Chicago and Los Angeles, are going through them at their own pace.

In Los Angeles, for instance, “scooters have been set on fire, tossed off balconies and even dumped into the ocean – a backlash that is a mélange of anger over so many tech companies popping up in Southern California and anger that they’re clogging up public spaces,” according to a newspaper report. “While the scooters have been billed as affordable and environmentally friendly transportation options, in California some complained about collisions or near-collisions with scooter riders on bike paths and streets.”

In Chicago, the warmer weather means the return of big outdoor music events and smaller neighborhood summer street festivals, both of which in the past have been places where scooter companies and others involved in the sharing economy have promoted their services and products – and places where controversy has originated in the past.

Role of Payments

None of this is meant to imply that the collective power of all these backlashes will knock the sharing economy off its track toward more growth. In fact, it is expected to produce global revenue of $335 billion by 2025, up from $15 billion in 2015, according to one recent estimate. And investors are still pouring capital into companies operating in the sector. One example is Drivezy, the car-sharing startup based in India, which is in the process of raising $100 million in equity funding and $400 million in asset financing as it seeks to expand.

Meanwhile, payments are playing a role in bringing more consumers into the sharing economy, and helping businesses operate more efficiently and profitably. Examples came from the February 2019 Payments and the Platform Economy Playbook, a collaboration between PYMNTS and Yapstone, that the sharing economy was in focus.

The research spotlighted HomeAway, the vacation rental marketplace, and the need to ensure trust in transactions that take place across the platform. Compliance and regulatory issues remain top of mind, of course, but so does the overall experience of both buyers and sellers. To facilitate that trust in the travel relationship beyond security concerns, HomeAway – which is part of Expedia Group – employs a global team of engineers, data scientists and customer support agents who are focused on educating customers across the eCommerce platform, and to improve the payment experience.

As sharing economy platforms expand globally and become more popular, the pressure is on to cater to consumers and to offer seamless experiences for both buyers and sellers to remain competitive. This means localizing their services and not taking a one-size-fits-all approach when it comes to payment methods and user experiences. This approach can likely help some companies taking part in the sharing economy weather any new backlashes to the business model and its impacts.