Fraud continues to be a headache for businesses of all sizes, especially midsized and large online retailers. They saw on average a 35% in fraud during 2017, according to the recently released 2018 “True Cost of Fraud” study by LexixNexis Risk Solutions.
The cost of fraud is definitely expensive for these firms – every $1 of fraud costs midsized and large businesses conducting digital transactions between $3.00 to $3.37, which is up from $2.65 in 2016. The study also showed that e-commerce merchants selling digital goods saw a surge in fraudulent transactions, mostly the type associated with alternative transaction methods. Increased botnet activity also pushed costs higher.
With all of this money at stake, retailers need to do whatever they can to fight fraud. Is blockchain technology, with its promise of safe, tamper-proof digital ledgers the answer to your fraud problems? Maybe, eventually.
Blockchain and How it Works
A blockchain is a complete and transfer-proof record of asset transfers. A blockchain ledger keeps records of all activity electronically, but all of the data is held in multiple locations across the internet. Therefore, it is possible to trace the complete sequence of wire transfers.
Any person participating in a certain blockchain can view the ledger, which is held on a computer called a node. Those operating the nodes use an algorithm to develop a new block or entry into the ledger. Every new block is encrypted using a private, numerical key. All new entries are linked to previously made entries with additional encryption.
How Blockchain May Help
With the use of blockchain, goods and services move from sellers to buyers through a cryptographic payment landscape. This landscape offers a more precise, easy to determine, permanent record of payment processing for merchants. This is ideal because it makes disputing charges much more difficult. Additionally, this protects against possible data breaches and works across many platforms, including mobile and e-commerce.
Merchants that want to take advantage of blockchain technology, they will need to work with payment providers that use it. Blockchain technology does many things, including, bringing smart contracts to the payment process and disincentivizing consumers to dispute charges. Additionally, if a dispute occurs, blockchain makes it more difficult to lie about it, due its tamper-proof records.
The Major Obstacle
Though it security and transparency make blockchain attractive, there are challenges that keeping it from working on a large scale. If a business that make just a handful of transactions per year, then, yes, blockchain may be your answer. However, if you are thinking much bigger, then thick again. It can’t be scaled up enough to accommodate the volume a midsize or larger online retailer experiences. For example, blockchain technology can process about a half-dozen transactions per second while major credit card networks handles more than 50,000 per second.
The Last Word
Blockchain technology gives businesses a way to share responsibility with shoppers It may not be perfect, but it may be a step in the right direction. As the kinks are worked out of the system, it may be a viable approach.
If you are looking for merchant account services that take fraud seriously, then turn to eMerchantBroker.com (EMB). It works with businesses of all sizes and backgrounds, and it uses a chargeback mitigation alert system. The system prevents one in four chargebacks. To apply for a merchant account, use EMB’s simple online application process.