With the steady rise of digital commerce and the shift toward online transaction methods, the payment sector in the global financial services system has arguably experienced significant growth. 2017 saw an 11 percent growth rate generated by payments – which topped close to $2 trillion in global revenue. Following this trend, studies project the payments sector will reach $3 trillion by 2022.
Merchants and consumers alike are adopting app-based commerce and in-app payments in increasing numbers, with enterprises investing more in mobile applications with transformative use cases to enhance omnichannel retail experiences for customers. Additionally, the rise of digital wallets (think Apple Pay, Google Pay, Amazon Pay, etc.) and cross-border transactions are also contributing to this increasing growth.
From these findings, it’s clear the payments sector is an expanding and increasingly important part of the broader financial industry. However, based on our findings, this growth has come with a number of challenges one of them being cybercrime. Data from Javelin Strategy & Research confirms that identity theft resulted in the loss of $16.8 billion in 2018 which affected close to 17 million U.S. consumers.
In this issue find out how fraud is proving to be a challenge and how decentralization can help eliminate the risk of fraud in payment processing services.
Blockchain - A New Horizon for Payments Processing Services
Compared to last year, blockchain or the distributed ledger has had a relatively quiet year so far. But pilots of the technology are being carried out in various industries with financial institutions at the forefront. PDX Coin is one such solution that seeks to change payments to the same magnitude that debit and credit cards did back in the 1970s.
But first, let’s have a 360-degree view of how blockchain can eliminate the risk of fraud in payment processing services
• Mitigate Identity Fraud
Identity fraud in payment processing services is a serious threat to all ecommerce platforms, as its operating model is largely rooted in online transactions. Identity fraud or identity theft involves gaining control of users’ personal information to carry out purchases, access funds and in some extreme cases fraudsters can open and close savings and checking accounts, loans or credit cards before banks can detect any suspicious activity.
However, with a blockchain solution, users will have an open, transparent and cryptographically encrypted record of all kinds of payment transactions and activities. This decentralized record will be free of intermediaries. Users will be able to easily verify the authenticity of digital identities (think date of birth, SSN or address) which a cybercriminal may try to use to make a transaction.
Moreover, a blockchain solution will allow for permissioned networks which guarantees consumer protection and helps alleviate privacy concerns as consumers will have more power over their personal data.
• Stop Card not present fraud
Card not present fraud is the most common category of cybercrime as fraudsters who have access to stolen credit card numbers, expiration dates and CVV numbers can easily carry out ecommerce transactions- especially those that don’t require cardholders’ IDs for verification.
Hence the imperative to develop a payment system that can merge payment activities into users’ digital identities and then pass these records through a blockchain network for real-time verification and risk assessment. On a similar note, a distributed ledger of records implies that merchants could easily verify clients’ identities up front instead of clients having to maintain different accounts with each merchant or re-authenticating themselves repeatedly.
• Easily Trace and Recover stolen money
In case of fraud, a payments processing service that is based on blockchain technology could easily trace the entire sequence of transactions. A distributed ledger technology creates a complete record, with copies of the record stored on multiple nodes; and this makes it impossible for cybercriminals to tamper with.
In fact, the use of cryptocurrencies makes it even easier to trace transactions as they come with best-in-class security protocols. The digital wallets are cryptographically secured, multi-signatures can be put in place to ensure trusted and secure access and data can be stored offline. Essentially, this makes a blockchain-based payments processing service more robust.
• The need for Smart Escrows
Traditional escrow services and underwriting processes can sometimes result in a tedious online buying and selling process. The process is normally fraught with complexities and not to mention it requires additional intermediaries like an escrow company who charge extra fees.
However, with the use of smart contracts, online retailers will be able to sell anything and at the same time combat fraud. Smart contracts work by allowing both retailers and consumers to establish “if/then” contracts which means the requirements of the first phase of the process have to be satisfied in order to allow for the second phase.
This way, a customer will not have to worry about losing their money in case of a failed purchase or faulty product while a retailer won’t have to worry about not getting paid.
PDX - A Banking and Payments Technology Deal for the 21st Century
PDX, a globally compliant digital currency with actual utility, offers all of the advantages of blockchain-enabled digital currencies while providing a verifiable asset base (physical reserves of crude oil and natural gas, and other energy assets) to protect its value, stability and security as a medium of exchange.
Transactions will be recorded in a blockchain distributed ledger, and, as a result, these transactions will be trustless, censorship-resistant, permission less, and private. Unlike other forms of asset control or money transfer, once a transaction in PDX is confirmed by the blockchain network, it will become irreversible.
PDX will utilize the best available protocols for digital currencies and will help promote the ongoing change in the way global financial transactions occur by removing artificial barriers caused by legacy financial institutions, thereby enabling:
- True anonymous digital payments anywhere in the world.
- Very low transaction fees and fast processing times compared to traditional setups.
- Payments between anonymous parties, ensuring privacy.
The PDX technical platform, which has already been fully-developed, employs smart contracts that digitally facilitate, verify, and enforce the negotiation of a contract when performing transactions.
The PDX team is currently laying the groundwork to shortly commence the development of a proprietary crypto / fiat payments app that interfaces with both merchant point-of-sale terminals, physical and online, as well as a consumer's digital wallet. It’s based on a similar but fatally-flawed app developed by Flexa Network, Inc., but with all those flaws removed, and PDX's own superior proprietary features baked in. It will be the key payments portal for PDX Coin, obviously, but will also accept a limited number of other larger and highly liquid cryptocurrencies such as BTC and ETH, as well as a couple of stable coins.
A key feature of this app is that it will replace Flexa's clumsy and unviable stable coin and staking app, with a simpler payments processor and banking capability. It will offer simplicity and ease of use for the consumer - no more difficult than paying with cash or a visa card is today. For the merchant we offer a host of benefits:
- Transactions are instantly verified and confirmed through the blockchain. No chargebacks.
- No more waiting 3 days to be confirmed and paid.
- Elimination or at least significant reduction of fraud.
- Merchant gets instantly settled in whatever currency they choose.
- Interchange fees reduced from 3 or 4%, to no more than 1%.
- Peer-to-peer - all the middlemen are gone, except PDX’s internally-owned licensed banking entity, which is there for less than 30 seconds.
Over time, and for obvious reasons, this will take off in a big way, and it’s a "Visa-killer" as the system will not accept Visa or Mastercard, but only accept BTC and other cryptos. The merchant software that is currently under development will help this process and turn it into a trend.
On the merchant's end of any transaction, the PDX payments app will be embedded into their existing POS terminals. They won't need new hardware. The consumer will go to the store, point their phone-enabled wallet's QR code at the POS terminal, and the transaction is completed and instantly confirmed. Simple. And the merchant won't even necessarily "know" they are being paid in crypto, because PDX’s banking platform will instantly convert the crypto used in the transaction to whatever other currency the merchant prefers.
For the consumer, the PDX payments app is embedded in their wallet, and is simple and easy to use. All they have to do is point it at a POS terminal in a store or transmit their QR code online. Voila - bill paid or purchase confirmed!
Ultimately, consumers will be able to perform transactions in a secure and trusted manner using the PDX Coin while merchants will receive immediate and guaranteed payment for a fixed amount of local fiat currency. Merchants will be able to easily expand to new markets where credit cards are not used, and fraud rates are high.
It Takes a Village
The increasing maturation of blockchain technology is accelerating tremendous change across all components of the payments value chain and could transform traditional operating models.
However, for this to happen seamlessly, extensive collaboration across industries, technology providers, government agencies, regulatory bodies, banks, credit bureaus, etc. is needed. PDX is committed to working with domestic and global governmental agencies, financial institutions (such as the Bank of Lithuania), traders and users of commodities to develop protocols to help facilitate PDX’s adoption as a leading digital reserve currency.
Merchant uptake is the key to mass global adoption. It’s all marketing, and the slow seep of time, and ever-increasing acceptance. PDX’s strategy is to onboard as many merchants as possible all over the world. The consumer will follow, and this will drive the demand for the PDX and the token price with it.
We believe blockchain’s decentralized and trustless model can lead to new opportunities and benefit the payments sector through enhanced transparency, improved security, greater efficiency, and easier traceability.