A Shared On-Demand Future
1 September 2016

A Shared On-Demand Future

Although peer-to-peer services are not particularly new, their fusion into online platforms will create perhaps one of the biggest revolutions of this century with the so-called sharing economy and growth in on-demand services.

Digital innovation is at the core of this revolution, in the form of peer-to-peer (P2P) platforms, such as Uber, Lyft and AirBnB, which help users to capitalise on their own products, space, time and skills. These user-centred platforms, usually mobile apps, allow consumers to engage in monetised exchanges on a scale not previously achievable.

Potential applications are virtually infinite, and the dominance of P2P business models is now a certainty for the years ahead. According to research conducted by PriceWaterhouseCoopers, the sharing economy sector represented a very small fraction compared to the traditional rental sector three years ago. However, it will be worth the same amount by 2025 (see image below). The UK has seen the fastest growth in Europe, with transactions almost doubling to £7.4bn in 2015.

Sharing economy and on-demand services break away from the traditional paradigm of ownership and promote a more efficient and sustainable use of products and time. As more people share products and services they automatically reduce the number of product idle hours and hence the need for further production of goods. In transport, this is particularly relevant as car ownership is intrinsically unsustainable; a private car typically being idle for 95% of the time. It could also be argued that these services are self-regulated on quality from user feedback and ratings, a system that is welcomed by users themselves.

However, the accelerated pace, informality and more unregulated status of the sharing and on-demand economy also carries important drawbacks and risks that need to be addressed. Peer-to-peer platforms, whilst user friendly bring hidden costs by risking work standards, consumer safety, and by potentially eroding the tax base. Since the transactions are made directly between customers, they can create unfair levels of competition when compared with other sectors. For instance, taxi regulations and licence fees force taxi fares to be higher than Uber fares. In addition individuals are often treated as contractors by these services rather than employees and thus not bound to basic work legislation and rights.

Also, more relevant to the transport sector, these platforms can create important environmental and social externalities. As on-demand ride sharing services grow in number and use, their prices create significant competition to heavily regulated public transport networks and fares. Some would argue that the Uber model can be the solution for the inefficiency of public transport, particularly in the rural setting and eventually replace buses in the future, particularly when connected and autonomous vehicles are considered. However, the current business models for these services tend to see them concentrate in urban areas of high demand and reinforce the inequality in accessibility in deprived areas, thus reinforcing economic inequality.

In summary, the rise of the sharing and on-demand economy is happening and it will deliver a revolution in the next few years. Mobile technologies will enable people to share access to products and services quickly and efficiently in almost every aspect of life. Important disruptions are already happening in the transport sector with the advent of platforms such as Uber and Lyft and the move towards Mobility-as-a-Service (MaaS). Rather than fighting back, it is important that we acknowledge the trends that as an end user and consumer we welcome, and embrace these new platforms with further innovation to ensure they lead to a sustainable future in both the urban and rural context.

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