According to data from Visa’s Cybersource 2017 Fraud Benchmark report, 62% of companies surveyed indicated credit card chargebacks were their top fraud management key performance indicator. Whether those chargebacks are the result of friendly fraud (consumers intentionally requesting a credit card refund for late shipments, quality disputes, etc.) or the result of criminal intent, the end result is a growing concern for businesses of all sizes.
With the increasing popularity of m-commerce and e-commerce, the number of ‘credit card not present’ transactions has skyrocketed. Chargebacks can be considered part of the cost of doing business for larger corporations, but for smaller companies, chargebacks are a direct hit to a small business owner’s profit margin. When a customer disputes a charge and receives a refund from the credit card company, the customer gets their money back, leaving the business at a loss. Luckily for today’s business owners, blockchain technology is about to offer a solution to their current chargeback dilemma.
Blockchain technology makes sure all transactions are processed correctly. This prevents double spending and ensures a safe and secure payment method for businesses. Smart contracts can be utilized to implement an escrow service, with funds being placed in escrow until a purchaser receives the product or service they paid for. By integrating distributed ledgers into their payment structure, companies can reduce their annual chargebacks. By relying on blockchain data tracking to verify each step of the purchase and delivery of goods process, both parties can trust goods/services will be delivered as expected.
Blockchain data verification also offers significant improvements to international credit card processing. Instead of prohibiting sales to ‘no go’ countries where charge card fraud is prevalent, merchants can use the power of blockchain-enabled identity verification to reduce chargebacks. This can reduce credit card fraud losses while accelerating sales opportunities at the same time. Especially for small businesses, the ability to grow their companies internationally is a significant blockchain-enabled opportunity many small business owners will find intriguing.
As blockchain-enabled credit card processing becomes mainstream, expect to see a rise in payment protocols by major charge card companies. With Mastercard already pursuing bitcoin-enabled credit card transactions and American Express diving into blockchain-enabled loyalty rewards, the race is on to see which credit-granting card companies go all in on blockchain technology as an underlying infrastructure to their business processes.
Fortunately, today’s tech-savvy enterprises don’t have to wait for credit card companies to adopt smart contracts and blockchain-based identity verification. Serve’s open-source, decentralized platform allows companies to verify transaction data and utilize smart contracts to reduce the number of chargebacks their establishment has to deal with. Currently in closed beta testing, the ability to verify customer identities and reduce chargebacks will be available to Serve stakeholders as soon as the Serve platform is live globally. Peruse our Serve white paper to discover how blockchain technology and smart contracts will be used for everything from dispute arbitration to escrow funding. We think you’ll be as intrigued by the future of blockchain-based business development as we are.
