Digital sharing initiatives that aim to address development challenges in emerging markets will need to incorporate three principles into their models. These principles have been essential to the success of digital sharing models in the developed world, and will be no less essential in developing countries.
Establish the base for digital sharing
A digital sharing initiative must create trust between strangers, whether by building reputation tracking systems, reducing information gaps, or guaranteeing consistently high-quality experiences. Consider Airbnb, a now well-known service where local homeowners rent unused space to visitors. Lack of trust long prevented many from sharing their homes with strangers, so those valuable assets sat unused when the owner was away or only using part of the space. Features of Airbnb’s platform—such as user reviews, digital payments, and identity verification—increase trust between homeowners and potential renters, shrinking the trust barrier.
A successful digital sharing initiative must focus on “share-friendly” assets likely to create socioeconomic value: assets that are under-utilized, in limited supply, and highly price elastic. Airbnb has built itself on one of the world’s most “share-friendly” assets: locals’ homes. Owners have spare space (under-utilized); are often located in areas with scarce availability (limited supply); and their space is highly coveted by travelers, particularly during holidays and other peak travel times (price-elastic).
A successful digital sharing initiative must reduce the marginal costs of sharing below the marginal benefit for the owner. In practice, this means digital sharing initiatives often focus on markets where transaction costs are high, since digital platforms typically reduce these costs by eliminating middlemen, providing real-time data, supporting digital payments, offering intuitive interfaces, and dynamically balancing buyers and sellers. For example, Airbnb provides a user-friendly interface, a wide range of listings, and a secure digital payment system while quickly responding to shifts in supply and demand.
Create a strong foothold for digital sharing
The above principles are necessary but not sufficient. Scalable success requires four enablers:
i. Increase the digital footprint:
Without the ability to interact with a digital platform – with a computer or smart phone – digital sharing is not possible.
ii. Build literacy:
Exchanging digital information requires some ability to read. In the future, user interfaces may evolve to no longer require literacy, but we are still far from that day.
iii. Make digital payments the go-to service:
Most digital sharing enterprises depend on rapid processing of peer-to-peer transactions. Digital payments are in most cases the fastest and most secure way to send and receive cash.
iv. Support entrepreneurs with effective regulation:
Entrepreneurs build most digital sharing models, navigating complex regulations designed for older business models and not conducive to digital sharing growth. Regulations should be tailored to digital sharing models.