Cyber criminals tend to avoid messing with blockchains the way they are willing to hack into other payment systems, especially in e-commerce

Bitcoin — it has gone from being deemed a “crazy and worthless fad” to a mainstream method of financial transactions. And its exchange value as of publication is around US$7,200 per BTC. No one is laughing at Bitcoin now.

The bigger disruption of the cryptocurrency phenomenon, however, may not be the currency itself, but the blockchain technology that is used to record and encrypt every transaction. There are implications for the technology in almost every sector that relies on secure data – healthcare, government, education, legal, and, yes, e-commerce.

The Nuts and Bolts of Blockchain

Without delving too deeply into the technology of blockchains, the simple explanation is thus: Every transaction, whether it is the entry of a patient’s medical record, a contract between two companies, a divorce settlement, or a consumer purchase, is entered into a “block” of transactions. Each block is attached to the block before it and to the block that follows it – in a chain.

These “blocks” are permanently memorialised and encrypted, and, though publicly accessible, cannot be altered in any way. Any attempt to alter them would send out “alarm bells” all along the chain and simply could not be successful.

There are too many people involved in the chain and all would be alerted. Cyber criminals tend not to want to “mess with” blockchain the way they are willing to hack into other payment systems, especially in the sector of e-commerce.

It’s a Matter of Trust

Ask Equifax and Target and their customers. In the case of Equifax, their recent cyber security breach affected some 143 million U.S. consumers. And giant retailer Target is still dealing with its security breach from 2013. To date, it has paid out US$18.5 million for a breach that affected 41 million customers, on-site and online. And these are just two examples that made headlines. The entire e-commerce industry if fraught with cyber fraud.

And once a customer has experienced the pain of a cybersecurity breach through an e-commerce retailer, he is lost to that retailer rather permanently. Trust and reputation are gone.

Add to this the general lack of trust that is building from a number of other Internet scams, and you have a consumer population that is growing more and more leery of doing any kind of business online.

What Retailers Are Currently Doing

The picture is not all that wonderful. In a recent survey conducted by Cybersource, account takeover through fraud is one of the top three issues that online retailers face. And yet only 30% had tools in place to monitor account takeover fraud. Of those that have adopted the latest automated tools to “flag” potential fraudulent account takeover, there is the admission that those tools are not foolproof. Cyber criminals find ways around them as fast as new security measures can be put in place. And the expense of manual verification of consumer identities, while still effective, is expensive.

Also read: How can blockchain disrupt the app store business?

A variety of tools are currently in use. There are those card verification numbers on the back of a credit card that are requested; there is address verification; there is email verification and reverse lookup of phone numbers; and, in the most sophisticated of circumstances, fingerprint and voice recognition may be used. There are also a number of fraud-scoring models that will flag suspicious transactions and send those transactions over for manual verification.

And yet with all of these tools, fraud still occurs. Perhaps it is time to implement a simpler, more foolproof methodology – blockchain.

What Blockchain Tech Brings to the Table

Consider this: The worldwide e-commerce industry is projected to be in excess of $4.058 Trillion by 2020, and that will involve more than 2 billion global consumers. Think of the have this represents for cybercrime, given that these are tech-savvy hackers who will continue to devise methods of breaking through every new security technology that is developed. After all, it takes only one tiny human error on the part of an e-commerce business employee to open floodgates of fraud. Blockchain can become the answer. And here’s why.

Blockchain technology works as a distributed ledger, recording every transaction in a tamper-proof manner. No need for all of the expensive and continually evolving security tools which retailers keep putting into place. Each transaction is permanently embedded in a block.
Blockchain technology allows consumers in developing countries, without access to banks and bank cards, a seamless method of purchasing goods and services. This is an ever-widening consumer population, with cell phones but no credit cards and no way to get them.
Payment processing is faster and cheaper for the retailer. According to one of the co-rounders of Monetha, a blockchain payment processor, as many as 16 separate steps are required for traditional payment processing, with fees for the merchant ranging up to 7%.
Blockchain technology has the potential to restore trust and reputation for e-commerce retailers. Once consumers come to realize that their data and their transactions are free from fraud and identity theft, they will consume with confidence. And the use of blockchain technology is a great marketing tool to foster that trust.
Major retailers are beginning to see the value of blockchain. Alibaba, the Amazon of Asia, has now recruited blockchain experts to determine how the technology can be incorporated into it payment processes.
It is now predicted that at least 10% of worldwide GDP will be generated via blockchains by 2025. Consumers will come to expect that the online retailers they use will this technology to secure their personal and financial information.

Blockchain technology, whether it is used by consumers in conjunction with cryptocurrency or not, is a huge innovation in the war against e-commerce fraud. Retailers should embrace the attractiveness of this option for consumers and begin to implement its use. There are a number of blockchain payment processors, and more are rapidly arriving. It would seem a smart move to explore the benefits and get on board.

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