Home Business Why blockchain is the next revolution in payments

Why blockchain is the next revolution in payments

by maria

By Stefano Bettinelli, Head of Innovation, MultiPay Group

Customer trust is imperative for business growth. This is especially true in retail, where greater confidence in a seller builds advocacy and loyalty from consumers. In turn, they engage more with a brand and help to attract other customers. However, maintaining trust can be difficult. Research from PwC indicates that 32% of people would stop doing business with a brand they loved after just one bad experience.

This is where blockchain can make a significant difference. With nearly three-quarters of people in PWC’s research saying experience is an important factor in their purchasing decisions, the use of blockchain to make the customer experience better – especially when it comes to key moments, such as payment – can be a gamechanger for brands.

Blockchain revolutionising payments

Innovations in blockchain technology have made huge strides in recent years, enhancing the payment experience.

Importantly, the crypto currencies based on blockchain technology can almost be viewed as universal currencies and the ability to pay using crypto currencies is attracting public interest. In theory, they can be used no matter what country or sector you trade in.

Research by Visa indicates that 55% of global consumers have strong interest in crypto-linked cards that link to digital currency balances and allow them to pay through such methods. This rises to 83% amongst the most active owners of cryptocurrencies. This opens significant opportunity and choice for retailers and merchants to embrace consumers wanting to make use of alternative payments.

Building trust and tackling the counterfeiting industry

The use of blockchain doesn’t end with the choice and control it offers retailers and consumers however. Nearly one trillion dollars will be lost to counterfeit products this year. In fact, research by Incopro shows that two-thirds of consumers who unintentionally buy counterfeit goods lose trust in buying from that brand again, and a third are less likely to buy from a brand’s website if its products had been susceptible to counterfeiting elsewhere online.

Clearly, counterfeiting is a major source of concern damaging the profitability and reputation of many businesses at a vital time of economic recovery. However, blockchain presents a unique opportunity for brands to re-take control. Luxochain, a partner of MultiPay, provides a pioneering integrated payment and blockchain solution for the authenticity of products in the luxury, retail, and pharmaceutical industries.

By connecting electronic tags that are inserted into a product at the point of manufacture with non-fungible tokens (NFT), each product has a unique digital fingerprint on the Luxochain blockchain. Once a purchase is completed, the NFT is transferred to the customer and placed in their Luxochain app. In the future, if the owner decides to sell the product at a later stage then the NFT is easily passed on ensuring a verifiable chain of ownership back to the original manufacturer. This significantly reduces counterfeiting and increases confidence in the products being bought.

Easing the friction of cross-border payments

One of the other most immediate uses of blockchain is cross-border payments, often an area associated with high transaction fees and delays. With the sending of money between territories far from a borderless experience in most cases, blockchain can connect disparate international financial institutions, sellers and consumers. As a result, cryptocurrencies enable faster transactions between these parties more efficiently and with either very low or zero transaction fees.

Furthermore, the surge of stable coins enables users to benefit from the transparency and security blockchain offers especially in a cross-border scenario, where traditional transfers often require multiple intermediaries, high fees, and may be open to security breaches. Stable coins are cryptocurrencies whose price is pegged to a specific fiat money, such as dollar or euro, and can be easily transferred via the blockchain. With a 1:1 pair with the underlying fiat currency, these assets have extremely lower volatility than other cryptocurrencies.

Securing payments to help others

Digital fundraising can also be facilitated through blockchain, as charities can accept payments and boost income securely, transparently, and globally without paying restrictive exchange and transaction fees. On #CryptoGivingTuesday in 2021, over $2.4m worth of cryptocurrency was donated to charities via the Giving Block platform, a crypto donation and fundraising platform for non-profits.

Charities such as Save the Children, The Water Project and the RNLI have been accepting digital currency donations for several years as a way of making sure they are open to as many fundraising options as possible. For the donor, making a gift through blockchain ensures their money is going towards its intended purpose therefore increasing trust in the charity as well.

Blockchain is certainly an exciting area of innovation, and whilst we are on the cusp of mass adoption, we must remember that it is unlikely to completely replace more traditional methods of payment in the immediate future.

Transactions, especially internationally, must meet strict regulations and compliance. As such, it’s difficult for many companies working with blockchain to offer these systems. Furthermore, we must also give thought to the sizeable carbon footprint of blockchain technology which is receiving significant attention at present. However, with time, as demand increases these issues will likely be resolved. In the meantime, however, blockchain is proving itself to have a powerful impact for many retailers, and other organisations, where it matters most – building great customer relationships.

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