From word-of-mouth to star ratings: Platforms and the changing nature of trust in the informal sector

By Mindy Park, Arfive Gandhi, Yudho Giri Sucahyo 

Do digital platforms formalise informal cities? 

To some, the arrival and penetration of digital platforms in the vast informal economies of the global South cities may sound no longer new. To others, it still is a momentous opportunity to transform the informal sector. As the bustling streets fuse into the virtual marketplaces, the dynamics of transactions, trust, and community are being reshaped. To explore the renewed landscape of informal economies in the platform age, we illustrate the changing nature of trust by drawing on our recent research on platform use in the informal sector in Jakarta, Indonesia. 

Broadly, there are two important impacts of platformisation in the informal sector: incorporation and legitimisation. Platforms are seen to incorporate the informal sector into the broader economy. In doing so, certain platform features aim to guarantee the credibility and transparency of informal practices that are often deemed untrustworthy without active regulations in place. While some might frame this process as “formalisation of the informal sector”, in fact, platformisation itself hardly formalises existing sectors. What it does is simply insert the previously informal or marginalised groups into the wider urban economy, both as consumers and as traders.  

Then the legitimising effect is the impact of this insertion on trust building. What enables this trust are the new platform features (e.g., ratings/reviews and digital payment) that replace the traditional ways of building reputation and making transactions in the informal economy. Linking platforms with trust somewhat disguises us into thinking that there was simply no trust in the informal sector before platforms. On the contrary, trust was the most important factor that sustained the informal sector – word of mouth shaped trust and trust worked as an important “informal” institution even in the absence of formal regulations¹. In other words, with nothing much but mutual trust that people could resort to, trust has been the basis for their informal trade. 

With these incorporation and legitimisation effects, platformisation leads to evolving dynamics of trust amongst informal workers and consumers. In the traditional informal sector, the boundary of the interaction and social networks was largely within the physical informal city. The key change in the platformised city is that everyday interactions move beyond this physical informal space towards wider virtual networks that involve not only the informal class but also the middle and elite classes. That is, now the boundary that forms word-of-mouth has become much wider. The ratings and reviews formed by broader consumers (or simply the general public) shape reputations of platformised informal firms, not just the word-of-mouth formed within their existing social networks confined to the physical city.  

These dynamics are illustrated in our research in Jakarta. Here are several remarks and comments from the motorcycle drivers, street vendors and consumers in the informal sector, who now have become part of ride-hailing, delivery, and fintech platforms. These provide a glimpse of how differentiated their experiences are, and intriguingly, the way they express distrust against one another. For example: 

When asked about any negative or exploitative experiences working as platform drivers, they often mention how consumers or restaurant owners are treating them.  

•  “Sometimes passengers/customers use threatening or aggressive language” 
• “Their policies prioritise consumers. Drivers should only comply with the rules and ethical codes, which is not always easy” 
• “Platforms’ customer service only makes consumers more talkative” 
• “Platform fees include parking fees, but sometimes restaurants charge us these additional fees (due to misunderstandings of rules)” 

On the other hand, being entrepreneurs (albeit micro in scale), street vendors exercise more control over their business.  

• “I run this business, so I should take care of my customers myself. I can handle them myself and they’re (platforms) not part of it” 
• “In light of customer satisfaction, platform intervention is only a form of passive monitoring. Each business is already proactive in seeking solutions on its own” 

In the meantime, when asked about their overall experiences with platform use, some consumers are not entirely happy with drivers. 

• “Platform providers should carry out regular evaluations of workers on their digital platforms. So that workers with bad and dangerous ratings do not continue to work on the platform or are trained so that they do not endanger consumers” 
• “Platforms should try to increase motorcycle drivers’ digital literacy” 

Overall, the reality of platformisation is less aligned to claims of economic opportunities in incorporation and legitimacy in formalisation. Rather it presents new, more challenging domains around trust. With strong consumer beliefs in platforms’ contribution to transparency and a sense of distrust towards worker behaviour, these seem to amplify the distrust citizens already had against the informal sector (and vice versa). Adding fuel to this distrust may be heightened competition even amongst the drivers, street vendors and entrepreneurs. 

This might eventually hamper city-wide collective movements. With platform ecosystems still dependent on existing socio-cultural moral norms and class, negotiations between agents of differential power arise and contribute to shifting the consumer culture in platform use². Although there is growing conscientisation of the often exploitative and adverse impacts of platforms on workers across the globe, with a lack of trust, widespread collective action around platforms is less evident in the Indonesian context (but still, drawing only from a handful of comments above, we would not say it is conclusive yet). 

In the end, this is neither to romanticise traditional informality nor to critique consumers. Of course, trust only cannot fully fill the voids of formal institutions that are to serve broader purposes such as safety, protection as well as market efficiency. The solution also does not seem to be in denouncing “platform algorithms” that can make contributions to filling some (but with equal importance, not all) of the voids. Nevertheless, paying attention to the evolving dynamics of trust will shed new light on the way we understand the impacts of platforms and trust in the informal economy.  

As this evidence shows, we need to examine further the intersections of platforms and informality. What are the dynamics of legitimisation and extraction, control and autonomy, and order and freedom to make our platformised cities healthier?  

References

¹ Burbidge, D (2013) ‘Trust creation in the informal economy: the case of plastic bag sellers of Mwanza, Tanzania’, African Sociological Review, 17(1): 79-103. 

Odera, L.C (2013) ‘The role of trust as an informal institution in the informal sector in Africa’, Africa Development, 38(3-4): 121-146. 

² Rava, N & Lalvani, S (2022) ‘The moral economy of platform work’, Asiascape: Digital Asia, 9(0): 144-174, https://brill.com/view/journals/dias/9/1-2/article-p144_8.xml?language=en&ebody=pdf-89805.