Sharing is not often associated with business, but new technology is driving an evolution in commerce that is great news for consumers across the globe. Known as the "sharing economy", this new mindset is causing disruption in numerous industries and changing the way many of us go about our daily lives. While the technology is new and sophisticated, the concept is as old as trade itself.
In this democratised marketplace, accessed through online platforms, everyday people can trade goods and services directly with each other without going through traditional business channels.
According to a recent article by the BBC, the sharing economy is forecast to be worth US$335 billion (NZ$465 billion) globally by 2025. As the sharing economy expands, people are coming up with more and more ways of democratising services that, in many cases, are expensive and difficult to access.
A prime example is Airbnb, a global peer-to-peer homestay network that allows homeowners to rent their houses out to guests.
Airbnb is now the world's largest accommodation provider with over two million listings worldwide. It is so popular in some countries that accommodation providers, such as hotels and motels, are worried. It has also run into some legal hurdles in cities such as Berlin and New York, but it will not be going away because it is so popular. Not only does it give consumers more choice and often lower prices than traditional accommodation, but it also gives homeowners an easy way to make a bit of extra money.
Another industry affected by the sharing economy is transport, where services such as Lyft and Uber is having a big impact on traditional taxi services. These companies have many parallels to Airbnb, and they are running into some regulatory hurdles because most legislation was passed before the online and mobile era.
Then there is finance, where peer-to-peer lending has emerged as an alternative to banks and finance companies. In traditional finance, you hand your money over to an institution as a deposit, and they go on and lend that money. In peer-to-peer lending, you lend the money directly to borrowers via a peer-to-peer online platform.
Harmoney was the first licensed peer-to-peer lender in New Zealand, and we have already facilitated $350 million of lending via our marketplace, in just over two years in operation. The peer-to-peer market has the potential to become much bigger and more influential in New Zealand if it is embraced as well as it has been in some other countries.
One of those countries is the UK, which has identified peer-to-peer lending as an important funding source for businesses. Peer-to-peer is relatively new in New Zealand and mostly used for consumer lending at this stage, but in the UK about 16% of lending to early-stage companies ($3.2bn) now comes via peer-to-peer platforms. While the sharing economy is disrupting some businesses, it may give others a funding lifeline.
For example, the BBC recently profiled an innovative service, DogVacay, which matches travelling dog owners with host families. Traditional kennels can be expensive, so this new option could mean large cost savings for dog owners. For dog lovers, this service allows them to get paid to look after man's best friend. This is what economists would call a "mutually beneficial exchange"!
But the sharing economy is not just great for consumers and those who make money from providing peer-to-peer services. It could also enhance the economy and improve productivity, by enabling more efficient use of both physical and human capital. Per the BBC article, there are US$3.5 trillion worth (NZ$5 trillion) of idle assets in the world. Why spend countless dollars building new assets when we can better utilise what we already have available?
As the sharing economy becomes more ingrained in society, our whole attitude to ownership may start to change. Why do you need to own a car when you can use a ride-sharing app to order one, wherever and whenever you need it? Similarly, owning a bach is a life goal for many Kiwis, but most of us only use them a few times a year. It seems like a waste of money when you can use bookabach to hire a bach of your choice.
Nobody knows how far the sharing economy will go. For now, it remains a niche segment of the market, with the vast majority of consumers still purchasing goods and services through mainstream businesses. However, it is refreshing that in an era of giant multi-national companies, new technology has enabled us to trade with each other in a very old-fashioned way.
Neil Roberts is founder and CEO of Harmoney, the largest peer-to-peer lender in New Zealand and the first company to receive a P2P lending licence from the Financial Markets Authority. In just over two years $350 million has been lent via the Harmoney marketplace.
Watch Harmoney Joint CEO Neil Roberts talks about the origins of peer-to-peer and the challenges and risks he faced starting up the first business of its kind in New Zealand.