Online fraud has been one of the biggest cons of e-commerce, with merchants losing millions to fraudsters. Research indicates that in 2021 alone, merchants spent about €7 billion (Over $7 billion) on detecting and preventing fraud. Moreover, research shows that the annual fraud growth is increasing by 1.5% annually.
Traceability of Goods in Supply Chain
The supply chain is one of the most popular systems used by fraudsters to exploit merchants. Essentially, fraudsters want to manipulate the goods in the supply chain. The manipulation could occur anywhere, from packaging, branding, and even transiting.
In 2017, fraud was listed among the top operational risks. As such, merchants need to know how to deal with the problems. One of the best ways to counter online fraud in e-commerce is by leveraging the blockchain ecosystem. So, how can blockchain in e-commerce protect merchants from fraudsters? This guide highlights different blockchain features tailored to counter fraud.
Consider this, the merchant orders goods; they are correctly branded but somewhere in transit, fraudsters manipulate the goods. While the perfect goods left the wholesale shop, the ones reaching the retail shop are knock-offs. So, how can blockchain help protect these merchants from such fraud? Traceability!
Yes, the crypto landscape has seen the rise in blockchains like VeChain, which help foster complete traceability in the supply chain. Essentially, blockchains can record everything online and in real time.
Like in VeChain, blockchains can link with IoT devices to deliver real-time geo-location. By both the buyer and seller getting real-time geo-locations of goods in transit, persons in transit will not have time to manipulate the goods. This real-time traceability helps merchants ensure the goods reach their destination in the proper condition.
Protection from Business Identity Scams and Phishing
Phishing scams have been a popular tool used by online fraudsters to suck dry the buyers and even tarnish merchant’s names. A phishing scam popularly involves tricking customers into visiting fake web pages or links, which could then involve taking their account details.
Consider this; Merchant A is popularly known for supplying office stationery. Fraudsters create fake websites that look similar to merchant A’s. They also send emails or messages to people to click the link and make orders, only for them to deal with a fake web page.
While this could be an average phishing scam, it could also be said to be a business identity fraud. The fraudsters have created a fake identity of the merchant to defraud the public. So, how can the blockchain ensure that merchants are safe from scams?
Well, blockchain technology brings around a public ledger system. Transactions and details about them are recorded on this chain and can be accessed by anyone. The transparency associated with blockchain makes it easier to know if you are dealing with the right shop or not. If you visit blockchain explorer pages like Etherscan and BSCscan, you can track all transaction details and even differentiate the actual merchant’s address from the fake one.
Blockchains help merchants protect themselves from business identity theft by ensuring data transparency. Moreover, merchants can leverage browsers like Brave, which have anti-phishing solutions.
Blockchain Has No Single Point of Failure
Blockchain’s distributed/ decentralized nature is a feature that helps protect merchants from fraud. By being distributed, blockchain does not have any single point of failure. Instead, if one point fails, most of the blockchain will continue to operate.
So, how does this help protect merchants from fraud? Essentially, the decentralized nature means there is no single point where fraudsters can create a fraud scheme.
Moreover, once fraudsters complete their schemes, they autonomously want to delete any evidence of past frauds. However, since blockchain keeps the details distributed, every data remains public, and merchants can know and avoid fraudulent actors in the ecosystem. This decentralized data allows merchants to do research about a particular person, hence won’t fall prey to the scams.
Blockchain’s immutability is another feature that can help protect merchants from fraud. This can be pretty helpful, especially in supply chains.
Counterfeiting is probably the biggest problem associated with the current supply chain, and millions of merchants globally suffer from such scams. Merchants in luxury goods, clothing, food products, pharmaceuticals, and other industries have suffered huge losses from counterfeiting.
So, how can the blockchain ensure they receive authentic goods? Blockchain has the immutability feature, which means the goods will have provenance because the transaction history is permanent. As such, it will be impossible for fraudsters to scam merchants by claiming the products are authentic.
Also, as mentioned earlier, blockchains can link with IoT devices. Imagine if IoT devices are installed on products to deliver real-time info on temperature and even authenticity. This can help merchants stay away from knock-offs.
Permissioned Blockchain Restrict Participation Level of Contributors
While the general blockchains are decentralized, some have inbuilt permission features called permissioned blockchains. Standard blockchains are accessible by anyone. Anyone, including fraudsters, can access company and business records and corrupt them.
Permissioned blockchains restrict the persons who participate in the network, even stipulating their roles. These blockchains send invites to members to join and contribute. You cannot participate in the network if you don’t have the invite.
Well, by leveraging permissioned blockchains, merchants will be able to protect themselves from fraudsters. They can just set the permissions of people allowed to make business dealings for the company.
Fraud is a severe pain point in the online e-commerce industry. Fortunately, blockchain breeds a host of solutions for this problem, aiming to ensure merchants feel safe while completing businesses online. The features at the nucleus of blockchain, including transparency and decentralization, are vital for enhancing security from fraudsters.