Gabe McGloin, Head of International Merchant Sales and Business Development at Verifi
Christmas is approaching faster than many of us are ready for, but one thing is certain: the e-commerce world is heating up with Christmas shopping well underway. Looking back to 2017, mobile sales accounted for 34.5% of all e-commerce sales. By 2021, mobile sales are forecast to account for 54% of total e-commerce sales. Whilst these figures present exciting growth opportunities to any merchant operating within an omnichannel structure, the potential should be approached with caution. Because nothing can detract from a successful holiday sales period more than transaction disputes, fraud, and merchant errors.
Data Is Key in a World of Frictionless Payments
Today’s e-commerce shoppers expect a smooth, efficient, and trouble-free transaction, and fraudsters see this as an opportunity. This balance between security and frictionless purchasing creates an environment for technically savvy opportunists to engage in thievery and deceivery. It’s unfortunate when all merchants and most customers are concerned with is ensuring the purchase and delivery of gifts, winding up festively wrapped and under the tree before December 25.
Once the Christmas rush is over, merchants should be able to look ahead to post-holiday sales. However, it is typically not until celebrations come to an end that merchants have to deal with customer billing confusion and fraud. Storing detailed purchase data gives merchants the information needed to track transactions, stop fraud and prevent chargebacks where possible. Unfortunately, this data is useful only when a customer contacts the merchant as the first point of contact in a payment dispute – but this is rarely the case.
Customers bypassed merchants, going directly to their issuer in up to 76% of dispute cases, according to a Javelin Strategy & Research report commissioned by Verifi. Although this course of cation may seem logical to the customer, it’s not ideal as issuers don’t have the same detailed transaction data as merchants, making it hard for issuers to effectively resolve the dispute. The result is often a provisional refund and a costly chargeback. For the business fraudster, this means “free” merchandise and unwarranted refunds. However, there are opportunities for merchants and issuers to share transaction data, resolve disputes, and prevent chargebacks.
Data-Sharing is a Double-Edged Sword
Customers trust merchants to protect their data, and in turn merchants must do everything in their power to maintain that trust. A data breach broadcast in mainstream news and circulated via social media can be devastating to a merchant. Complacency in the card-not-present (CNP) marketplace is the greatest threat to detecting, deterring, and preventing fraud in digital and mobile channels.
Fraudsters cleverly look to exploit gaps in a merchant’s security policies and procedures. They understand that merchants struggle to keep up with evolving payments innovations and make their living pouncing when merchants are most vulnerable, such as during the ultra-busy Christmas season. Before partnering with an issuer to share data and resources against chargebacks, merchants need to ensure that their security standards protect against any breach of customer data.
Protecting the crown jewels – the data
To benefit from the best practice of sharing data, merchants need to ensure a multi-step process has been conducted and is regularly audited. This includes:
- Conducting a data privacy audit: Identify what data your business needs and the actual data you are collecting.
- Only keeping necessary transaction data: Key transaction details, such as product purchased, merchant name and contact information, type of device used for the purchase and customer name, username, IP address, location, phone number, and email address. To help identify true fraud, retain customer information including their transaction history, previous transaction disputes, and refunds issued.
- Protecting all data you collect: Ensure your network, databases, and website are secure from hackers with regularly scheduled reviews and testing.
- Securing customer data: The customer service team needs to be up to date with best practices and current technology. Train your customer data team never to give out credit card information, addresses, phone numbers, or passwords unless they can verify the customer’s identity with security questions before proceeding with discussing their account.
Maintaining joy and good tidings post-holidays
Merchants and issuers have a vested interest in preventing chargebacks and fraud – but they must be especially vigilant during the busiest shopping period of the year. Fraud and mass scale chargebacks not only affect profit but can also result in reputational damage to merchant brands. By capturing, securing, and sharing transaction data with issuers, merchants can leverage their most fundamental tool to maximise profits and minimise disputes, during and following the holiday shopping season.
WILL BLOCKCHAIN REVOLUTIONIZE FINANCE?
By Ken Timsit, ConsenSys
Over the last 10 years, researchers, software developers, start-ups, and large companies have been conducting experiments aimed at determining whether networks based on blockchain technology can ultimately – in whole or in part – replace the infrastructure on which financial institutions and capital markets are built.
In today’s electronic databases, any information can theoretically be replicated at will. This is why most governments allow only regulated actors to keep records of digitized assets (banks, depositories), to avoid pitfalls such as the execution of misleading transactions or the creation of artificial assets. With blockchain, these pitfalls can be avoided at the source code of the technology, which is available to all members of the network. The creation of Ethereum enabled a more robust blockchain network capable of “smart contracts”, which once programmed, can run automatically without the results being modified or manipulated.
Contrary to what some critics argue, the potential of the blockchain is not the creation of a free and unregulated space in which everyone can invent new financial instruments. Rather, the potential lies in creating a much more efficient and globalized commercial and financial infrastructure, in which many layers of control and intermediation are no longer needed as they are replaced by transparent and immutable IT rules that ensure the same risk management functions.
For example, bonds are essential financial instruments on which a large part of our economy and savings are based. The issue and exchange of a bond requires the intervention of several dozen financial institutions (issuers, intermediaries and investors). Some regulated players in this intermediary chain exist mainly to ensure that it is possible to know, at any time, who holds each bond, in order to guarantee their rights to its bearers.
It is theoretically possible to simplify these stacks of operators by linking them to a global blockchain network, open to all stakeholders in the industry. The blockchain network can thus ensure at any time that the number of outstanding bonds corresponds exactly to the number of bonds issued, and that each exchange transaction is carried out without the risk of default.
The blockchain revolution is first and foremost the reduction of costs and delays caused by the current financial infrastructure. The blockchain revolution also creates innovation opportunities for consumers, savers, and investors.
The Web3 revolution, often used to refer to the blockchain revolution, will be driven by the reduction in transaction costs, allowing the emergence of new peer-to-peer business models that we are not yet able to accurately predict, but which will probably participate in a rebalancing of the relationships between financial institutions and their clients. Some international peer-to-peer payment and loan-to-peer savings investment models are already attracting increasing interest from the most sophisticated consumers.
Where are we in 2020?
Today, the blockchain revolution is still in its infancy. Transaction volumes through blockchain networks, public and private, are low compared to those of existing systems. The fixed costs of the technology are still relatively high, and the user experience leaves something to be desired.
However, innovations abound. It is already possible for me, from my smartphone, to buy digital assets whose value is equal to about one US dollar, and to lend them in three clicks to other users who will pay me between 1% and 10% per year for this service, depending on the type of platform.
The number of large operational business projects is still small, but very promising. Numerous international commodity trading players have joined forces to create Vakt and komgo, two platforms that contribute to a significant simplification of trade and oil financing. Similar and competing projects, Voltron and Marco Polo, are being launched. On the corporate side, the Capbridge 1x platform (Singapore) already allows shares to be traded on an Ethereum blockchain network. Other important projects such as LiquidShare (France), SIX Digital Exchange (Switzerland), Daura (with Deutsche Borse and Swisscom in Switzerland), Synapse (Hong Kong Stock Exchange) are in preparation. The World Bank, Société Générale and Santander have issued bonds on an Ethereum blockchain network. These initiatives are still experimental but have attracted significant interest from financial institutions around the world.
And of course, many projects aim to revolutionize global payments by creating digital assets on blockchain networks that are fixed in Euros, U.S. Dollars or other currencies, such as those of the Monetary Authority of Singapore, the South African Reserve Bank, and Union Bank of the Philippines. Since the announcement of the Facebook-initiated Libra project, many governments have expressed concern about the possibility of private companies controlling global payment flows, and have asked their domestic financial institutions to redouble their efforts to explore competing initiatives.
All of this is to say that adoption is happening, albeit gradually. The middlemen and intermediaries of the financial world will not be replaced overnight. Moreover, the exact formation or architecture of the new financial system is impossible to predict with accuracy. However, it’s safe to say that blockchain will enable a financial system that is more efficient and yields more value-add to consumers, users, and investors.
RECOLLECTING 2019 CRYPTOCURRENCY TRENDS & LOOKING FORWARD TO 2020
Marie Tatibouet is the CMO at Gate.io
It has been a bold and progressive year for the digital asset market with exciting announcements flowing in from technology behemoths and government bodies around the world. However, Facebook’s launch announcement of Libra (though they are now facing regulatory issues) and China’s new cryptocurrency law caught all the attention, affecting the Bitcoin price, and the overall market sentiment.
In 2019, the global market saw several catalysts emerging for mainstream adoption despite increased scrutiny around several burning issues such as wash trading and security breaches. For over 400 cryptocurrency exchanges in the world, being able to constantly improve on aspects around user experience and fund security is the only way to be sustainable. However, only a handful have real trading volume and technical expertise to build strong trust in the community. For instance, global wash trading has been the hottest topic of discussion in 2019 but new rankings on CoinMarketCap clearly indicate that the industry is working towards eliminating market manipulation.
Looking back at 2019
In 2019, digital asset organisations have constantly innovated to attract users but at the same time, the trading process has become increasingly fragmented, spiking the time gap between new users becoming long-term users.
Holding & Lending Funds
Since 2014, the Bitcoin margin trading market has expanded from $10 million to $100 billion. Margin trading has been a great use case in the cryptocurrency space. Many exchanges launched the feature to provide diversity to the trading experience and attracting a huge amount of users to the platforms. It allows traders to multiply their profits on successful trades, providing a range of possibilities for both profits and losses.
Staking is a process where users can buy digital assets and earn interest by keeping (holding) them in a cryptocurrency wallet for a particular period of time. It has proved to be a strong use case for digital asset companies as it encourages user participation. In 2019, staking programs brought stable earnings for cryptocurrency investments made by the users. For instance, HODL & Earn launched by Gate.io in August 2019 has been bringing stable earnings for cryptocurrency investments made by its users. The competitive advantage for HODL & Earn is its annual interest rate, which is as high as 32%.
Crowdfunding as an approach to build and grow products has seen a lot of traction over the last decade or so. One of the highlights this year was the emergence of “Initial Exchanges Offerings”, more commonly termed as IEOs, an alternative to traditional IPOs where companies can raise funds by selling a quantity of digital assets to investors, supervised by cryptocurrency exchanges. With over 1.5 Billion funds raised, IEOs shook the entire cryptocurrency space in 2019.
Owing to the richness and variability that we have seen so far, there has been no one clear winner to pick, but there’s also no ignoring the leaders; Gate.io has the second best average IEO returns, raising over 80 million dollars in its first 5 projects and has similar offerings panned out for 2020.
Deals and Discounts
Discount deals are being increasingly leveraged by digital asset companies, encouraging users to maximize their capital. Holiday seasons such as Black Friday are packed with jaw-dropping discounts. However, as an industry, we should aim to integrate discounts in digital currencies into the mainstream world, which would bring price stability.
Dynamic User Relationship
Cryptocurrencies are being taken seriously and companies are designing consumer-specific strategies. It is a great indication of the fact that more and more people are interested in trading digital assets. However, we have a long way to go when it comes to tackling the industry challenges and unlocking value for the entire ecosystem.
Regulation, Security, and Mass Adoption
Central banks of the US, Europe, China, and Ghana are looking at creating their own central bank digital currencies, putting a structure to the adoption of the blockchain technology across finance and other industry verticals. Japan’s recent regulation amendments, China’s new crypto law have laid the right frameworks for mainstream crypto adoption.
While we have major countries pushing for the mainstream adoption, security remains a major concern. Cryptocurrency thefts and frauds in Q3, 2019 annual stand at USD 4.4 billion and this will only increase if fund safety mechanisms aren’t strengthened. Therefore, the strongest will survive as far as digital asset security is concerned.
Nonetheless, blockchain technology is helping to create an innovative and accessible financial system around the world and its mainstream adoption is closer than we can fathom.
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