The Advantages of Blockchain over Traditional Payments

October 26th, 2020 Kellogg Fairbank Leave a comment

E-commerce is expected to surpass $4.6 trillion globally by 2022, with the seamless experience of e-wallets boosting its popularity. The simplicity of services like PayPal and Stripe has helped to improve customer experience while giving merchants easy access to new markets.

Blockchain-based solutions represent the next logical evolution of this trend. By eliminating middlemen, cross-border blockchain payments can result in even faster transfers while significantly reducing costs for both merchants and customers.

The cost in trust in traditional payments

In a traditional payment flow, three to five parties facilitate a single transaction. Together, they make up what is called the “payments stack.” These different parties work together to create trust. They check that transactions can be carried out and manage the transfer of funds. At the same time, this trust has a cost, which is ultimately borne by merchants. Each party within the payments stack takes a small cut of a transaction.

A typical transaction involves a payment processor checking with the issuing bank if a customer’s card can be charged. Once a transaction is validated, which occurs within a few milliseconds, a merchant has a guarantee that they will be paid at a later date. Over subsequent days, funds are transferred from the issuing bank to the acquiring bank.

The traditional stack involves numerous charges. Card networks and other parties can also raise their fees. As recently as September 2019, Visa added a fixed charge of 0.02 EUR for merchants using 3D-Secure, which is increasingly required under new PSD2 legislation.

Cash flow, holdbacks and fraud

Cost isn’t the only issue merchants face with the traditional stack. The speed of transactions can also be a problem. While validation takes place in milliseconds, it can be days before money finally arrives in a merchant’s bank. This is not ideal for small-to-medium-sized businesses that depend heavily on cash flow to pay suppliers and employers.

When we look beyond card payments, the picture is even worse for merchants. In the US, the average B2B payment cycle takes 34 days to complete, with 47% of invoices being paid late!

So-called “holdbacks” are another issue that has come to prominence recently. Here, acquirers keep a percentage of a merchant’s revenue as collateral in case a service is not provided, and refunds must be issued. Holdbacks have particularly affected the travel industry as a result of the COVID-19 pandemic. Most travel is booked long in advance, and given the uncertainty introduced by COVID-19, holdbacks have increased significantly. This has led to reduced cash flow for merchants – and ultimately to the insolvency of Thomas Cook and Flybe.

While traditional payments are geared towards creating trust, 78% of businesses reported attempted or actual B2B payments fraud during 2018, with international fraud rising 136% from 2017–2019. Although nearly half of payment fraud is related to pen-and-paper processes, digital methods and credit cards are not immune.

Faced with this situation, it is not surprising that more and more companies are turning to fintech to reduce payment costs, particularly when it comes to B2B payments, where 1.8% interchange fees for cards introduce excessive overhead.

The promise of blockchain

When we view the payments stack as a means of generating trust, the promise of blockchain becomes clear: eliminating the stack entirely. Customers send funds directly to merchants, with transactions being verified by a decentralized network.

Blockchain promises great improvements for merchants in terms of speed and cost. No middlemen are required to check whether funds can or cannot be sent – the network will reject a transaction if a wallet has an insufficient balance. Once a transaction is confirmed, funds arrive within minutes. The only cost is a network fee, paid by the customer themselves.

What’s more, blockchain is ideal for protecting against fraud and encouraging transparency. The fundamental problem blockchain solves – the “double spending” problem – is directly related to preventing fraudulent transactions. Blockchain is designed to make it impossible to spend coins you do not have. Moreover, since blockchains are public ledgers, regulators can easily perform automated audits.

Blockchain is also a universal solution. While the US has ACH for bank transfers and the EU has SEPA, Bitcoin works the same everywhere. No bureaucracy is required to send funds overseas. Not only does this make designing integration protocols relatively simple, but it gives merchants easy access to new overseas markets.

A 2019 report from the European Payments Council indicated an increase of cryptocurrency use alongside the growth of e-commerce.

Blockchain has too many advantages over traditional payment solutions for merchants to ignore. By accepting cryptocurrency, merchants can tap into a growing multibillion-dollar market and get a taste of a cashless, borderless future.

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Kellogg Fairbank is Executive Sales Leader for Nash Link, a solution for merchants designed to make it as easy as possible to accept cryptocurrency from customers.

Archives, Global Logistics, Global Trade Daily, Software, Special Reports

Blockchain: The Next Big Tech Paradigm Shift

October 5th, 2020 Louis Lehot Leave a comment

While most of blockchain’s success over the past decade has been linked to bitcoin, Ethereum, and other cryptocurrencies, distributed ledger technology is now poised to move into mainstream applications and launch new opportunities in multiple markets.

Technological change has followed a predictable path over the past fifty or so years. Chips and devices got smaller, more processes were automated, and life became more convenient. Since the beginning of 2020, we have seen a rapid uptake in the pace, not to mention the massive adoption of technologies into our everyday lives. As we adapt to a long-term period of social distancing, the paradigm in which technology evolves has been upended, and every member of society has had to quickly find new technology-based solutions to accomplish tasks previously taken for granted. In the coming decade, technology will shift from automating and replacing manual labor to replacing routine cognitive work, and blockchain is poised to be a key driver of the “fourth industrial revolution.”

The paradigm shift into the “fourth industrial revolution” was first postulated by Klaus Schwab in a 2015 article published by Foreign Affairs, and refers to the evolution in the way we live, work and relate to one another, enabled by extraordinary technology advances. According to Schwab, these advances are merging the physical, digital and biological worlds. The social distancing measures required to respond to the global pandemic has put this fourth industrial revolution into overdrive.

What is blockchain, and why will it ascend over the next decade?

Blockchain’s influence will affect all aspects of your life, including how you work and purchase goods from clothes to groceries to houses. Everything.

Simply put, blockchain involves recording information in a way that creates trust in the data recorded. Blockchain is proof that you own something digital—whether it is a bitcoin or your personal health records. Blockchain proves you are the owner of whatever digital information you have on the distributed, decentralized public ledger.

Initially, blockchain was created along with bitcoin to give power back to the people. Since its creation, it has expanded well beyond cryptocurrencies and is growing exponentially. Estimates suggest that blockchain technology has been adopted by more than one-third of the world’s companies.

We already live in a digital universe. We no longer visit Blockbuster to rent movies, and very few of us have DVDs. Instead, we use Netflix, Hulu, and Amazon Prime to watch our shows and movies. We order all manner of products online. Blockchain has become essential because it allows us to own our digital goods, assets, and data.

A blockchain can be trusted as a source of truth. Suppose certain information (data) was included in the blockchain sometime in the past, but the data may not be correct. Records on the blockchain are immutable and provide an unalterable trail. A mistake can only be corrected by adding another block to the chain with consent from all participants. A blockchain records tangible and intangible assets among a network of peers that use the same software, algorithms, and cryptography to maintain the records.

Currently, there are two types of blockchain: permissionless (public) and permissioned (private). Participants use pseudonyms to protect their identity with permissionless blockchains, and there is no identification of participants. On the other hand, permissioned blockchains are protected by access privileges. Participants are authenticated, and a super-user may control the network. Permissionless blockchains are considered more reliable because of the consensus principle.

Blockchain currently enables many uses, including Tokenization to protect sensitive data, unalterable timestamping, the transfer of assets through a payment channel, and the facilitation of smart contracts. To date, blockchain has been used to make more processes more efficient by replacing components or by providing an entirely new blockchain service. The most well-known example of blockchain’s usage is cryptocurrency, but its possible applications are still being explored across many industries.

Why companies are integrating blockchain solutions

By 2023, the global blockchain market is set to reach $20+ billion, indicating how quickly businesses are expected to adopt blockchain solutions. The most prominent and influential companies worldwide have all turned their attention toward blockchain. Tech giants like Apple, Microsoft, Google, Amazon, and Facebook are investing billions in powerful technology. And, Wall Street wants in, too. What makes blockchain so attractive to business?

First and foremost, it reduces operational costs by obviating the need for a centralized authority. Removing intermediaries is crucial for business because it reduces costs and points of contact, improving company efficiency and growth. What could be better in the eyes of a business leader? Estimates suggest the adoption of blockchain technology will save than $100-$150 billion by the year 2025. Blockchain’s adoption will reduce the costs of personnel, support, operations, IT, data breaches, and much more.

In addition to blockchain’s efficiencies and security, it allows for the completion of transactions in seconds rather than days. Transaction speed is especially important in international interchanges.

We previously survey the investment environment for blockchain-based businesses here.

Despite blockchain’s many advantages, it is imperative that we understand the legal implications, risks, and opportunities its use presents.

Legal issues to watch for

Stakeholders in blockchain solutions will need to ensure that their products comply with a legal and regulatory framework that was not conceived with this technology in mind. From a commercial law standpoint, smart contracts must be contemplated for negotiation, execution and administration on a blockchain, and in a legal and compliant fashion. Liability, first and foremost, needs to be addressed. What if the contract has been miscoded? What if it does not achieve the parties’ intent? The parties must also agree on applicable law, jurisdiction, proper governance, dispute resolution, privacy, and more.

There are public policy concerns that should be taken into account in shaping new laws, rules and regulations. For example, permissionless blockchains can be used for illegal purposes such as money-laundering or circumventing competition laws. Also, participants may be exposed to irresponsible actions on the part of the “miners” who create new blocks. Unfortunately, there aren’t any current legal remedies for addressing corrupt miners.

Potential solutions

As lawyers and technologists ponder these issues, several solutions are being bandied about. One possible remedy involves a hybrid of permissioned and permissionless blockchains. Some transactions require intervention by a responsible party, such as when Know Your Client regulations are in play. All participants in blockchains and smart contracts where data is exchanged are data controllers. This means participants must comply with all data protection requirements.

Another consideration is what goes on the chain or what, instead, goes in the smart contract and off-chain. While it is possible to include provisions regarding liability, jurisdiction, and other legal aspects in the smart contract, this allows no room for interpretation because it is based on conditions. A better solution may be to have a real contract stored off the chain, but linked to it with a hash-secure value, for added confidence.

The ongoing regulatory push for more data with trends like controlled free trade, increased border security, and accreditation of economic operators, leads to higher compliance costs. This means that parties trading globally need higher supply chain visibility and security. Data that is both high quality and secure and trade compliance systems that can cope with the electronic exchange of data, are requirements.

Global trade involves many parties beyond the buyer and seller, such as customs and regulatory authorities, financial institutions, shippers, brokers, and insurers. There are multiple exchanges of data among those participants, presenting opportunities for implementing a blockchain to trigger and record invoices, bills of lading, and customs compliance.

Welcome to the future

As blockchain technology matures, global trade supply chains will increasingly use the technology, with the authorities monitoring transactions and compliance with customs declarations, duty payments, and sanctions rules. Further, combining blockchain with the Internet of Things will give manufacturers the ability to track products, manage risk in distribution networks and demonstrate good corporate governance.

While no one can predict how the future will unravel, it seems clear that blockchain will play an important role.

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Louis Lehot is the founder of L2 Counsel. Louis is a corporate, securities and M & A lawyer, and he helps his clients, whether they be public or private companies, financial sponsors, venture capitalists, investors or investment banks, in forming, financing, governing, buying and selling companies. He is formerly the co-managing partner of DLA Piper’s Silicon Valley office and co-chair of its leading venture capital and emerging growth company team.

L2 Counsel, P.C. is an elite boutique law firm based in Silicon Valley designed to serve entrepreneurs, innovative companies and investors with sound legal strategies and solutions.

Archives, Global Trade Daily, Software, Stories

How to Save Time and Money with Blockchain Smart Contracts

March 24th, 2020 Alex Rosen Leave a comment

Manufacturing processes are growing increasingly complex — especially as the coronavirus pandemic spreads — in today’s global marketplace. With so many moving parts, it’s becoming more difficult to reliably and efficiently track actions and data along the supply chain. Blockchain-enabled smart contracts are emerging as a solution — one that provides transparency and ensures everyone along the supply chain is following the same set of agreed-upon rules.

With everyone on the supply chain sharing the same logic and data, manufacturers can automate time-sensitive processes and avoid costly dispute resolutions. Blockchain is on the rise, and Gartner predicts that 30% of manufacturing companies making more than $5 billion in revenue will have invested in blockchain-powered projects by 2023.

Implementing the technology and data infrastructure to convert processes into smart contracts can seem daunting, and companies that don’t hit the $5 billion mark will be slower to catch up.

The fear of failing after the investment can be a serious deterrent. But smart contracts save enough time and money for manufacturers that the costs of waiting might be greater than the upfront investment needed to get started.

The Value of Smart Contracts

The core values of blockchain are transparency and trust, and smart contracts play a pivotal role in providing these benefits. Taken together in a business context, blockchain-based smart contracts make it possible to avoid disputes. A smart contract is software that automates a single trusted version of an agreement between parties. They might rely on one version of data about what’s happening (or has happened) and record the results of the contract, such as funds being transferred in exchange for using a piece of equipment.

Without smart contracts, businesses working together in manufacturing have to maintain separate systems that encode business rules with slight differences. The data they use might also vary from the data other companies use, making it difficult to reconcile any issues. These differences lead to disputes that require significant time and effort to resolve.

The automation and data standards that smart contracts provide allow manufacturers to consider different ways to work with partners along their supply chain. Their partnerships can be based on performance or quality in ways that would have been impossible to implement — much less trust — without the use of blockchain and smart contracts.

How Do Smart Contracts Work?

In a blockchain system, the word “contracts” doesn’t carry the same meaning as legal contracts. Instead, smart contracts are more broadly used to encode logic that often isn’t written explicitly in a contract. Unlike traditional software, they’re used to create business logic that multiple parties can rely on and trust.

Many of us are familiar with the concept of business rules in software systems. In the blockchain world, smart contracts are the business rules shared by the users of the blockchain. Think of blockchain like a shared database: Smart contracts are the rules that define how data can be entered or changed in the shared database. Within the supply chain, smart contracts are typically the rules shared by multiple businesses in the supply chain that are also users of the blockchain system.

For most applications, smart contracts can be executable versions of traditional business contracts, or they might be new logic that coordinates long-running processes and activities across different businesses. They’re trusted because they’re created and housed on a blockchain, which means the code is typically visible to system developers, business analysts, and auditors.

Although smart contracts are triggered by some external event, such as a user’s action or a change in external data (a commodity’s price, for example), the code they run is normally approved in advance by all businesses involved. Currently, businesses are already utilizing blockchain-secured smart contracts for a range of supply chain processes.

For example, some companies combine smart contracts with Internet of Things sensors to record the movement of supplies into a manufacturing facility. Then, they automate payment for those supplies. Others record the operating conditions of a machine to determine if maintenance is required or gauge the condition of manufactured products to ensure standards are met.

Such contracts produce equipment usage records and quality control checks in real-time, and parties on all sides of the contract can trust the data. How we handle everything — from securing supplies to monitoring equipment and manufacturing products — can be improved with the strategic use of blockchain-powered smart contracts.

Being Smart About Which Contracts to Convert

As companies convert more intrabusiness processes into smart contracts, the benefits of doing so grow easier to recognize. Shipments and payment approvals can be verified in real-time, and disputes are eliminated or resolved immediately with no intermediaries. The time and cost savings are substantial.

By using these strategies to determine where to use smart contracts, companies of all sizes have a better chance at reaping the benefits much sooner:

1. Break down costs before the converting starts. The first time a company implements a smart contract, the costs of establishing the blockchain system will be relatively high. These initial costs can often be the biggest deterrent, especially for smaller, less tech-driven companies. Over time, though, the incremental costs of automating smart contracts will go down. Account for this initial cost by taking time to identify the contracts that are currently the most costly to execute.

2. Prioritize external contracts over internal ones. Not every contract needs to be a smart one. In fact, the costs of executing some processes might not justify the investment in automating them. Focus on agreements, contracts, and other expectations that are between the company and another business (or better yet, where more than two businesses are involved), and rule out internal agreements between departments. Because trust is less of an issue, internal disputes can be reconciled relatively easily. Putting them on a blockchain would just be overkill.

3. Focus on contract difficulty — not frequency. Because the goal of automation is to create less work, it’s tempting to go straight for the contracts that are executed most often. Instead, focus on the amount of effort it takes to use each contract rather than how often it’s used. High-frequency contracts might be executed with few or no disputes, whereas low-frequency ones might be costly to manage due to complex and/or unclear terms. These are much better candidates.

4. Start with material sourcing for maximum impact. To know for sure which processes can benefit most from conversion into smart contracts, look for people throughout the organization who deal with reconciliation, quality control, and/or audit support. Also, consider the data used in each transaction. Between both parties, how important is trusting that data? Material sourcing is often ripe for improvement, and trust in data is critical to the relationship between manufacturer and supplier.

The ability to create smart contracts is becoming one of the best-known benefits of using blockchain technology in the manufacturing realm. Investing in the technology might be costly at first, but getting in on the ground floor will be easier if you use it to turn the right processes into irrefutable smart contracts.

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Alex Rosen is the vice president of business development at Chainyard, a blockchain consulting company focused on delivering production solutions that address financial services, supply chain, transportation, government, and healthcare pain points.

Archives, Global Trade Daily, Warehousing

10 Data Science Projects E-Commerce Businesses Are Using

January 30th, 2020 Kurt Walker Leave a comment

Today e-commerce businesses are using data science in many different areas to stay ahead of the competition. For instance, e-commerce sites are investing funds into personalizing shopbots to enhance customer experience and recommending products to buyers based on browsing habits and previous purchases.

Selling the best products only works if e-commerce businesses can identify who wants to buy them and recommend them when these customers are ready to make a purchase. Here are some ways e-commerce businesses are utilizing data science to enhance the customer experience.

1. Retain customers

One concern for every e-commerce business is customers switching to other e-commerce websites. Customer retention is crucial if a business is to expand and grow. There are many benefits from having loyal customers, such as receiving real-time feedback from them and having them recommend products or services to others.

A churn model provides metrics such as the number and percentage of customers lost to the business as well as the value and percentage of this loss. When a company is able to identify customers who are most likely to switch to a different e-commerce site, it can take actions to try and keep them.

2. Give product recommendations

Using big data analytics offers a way to understand the shopping behavior of customers and predict patterns. For example, being able to establish which brands or products are most popular when spikes in demand for certain products occur or times of the year when customers shop more can help to determine the right strategies.

Recommendation filters for a particular user are based on past searches, purchase data, reviews read, etc. and allow a personalized view. This helps users with the selection of relevant products.

For example, if you’re looking for a mobile phone on an e-commerce site, there is a possibility that you might want to buy a phone cover too. Deciding whether this is a possibility might be based on analyzing previous purchases or data searches of customers.

3. Analyze customer sentiment

Gathering customer feedback is very important for e-commerce sites. Using social media analytics, data science and machine learning, companies can perform brand-customer sentiment analysis. Natural language processing, text analysis, data from online reviews and online surveys are just some ways to analyze customer sentiment.

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If you need to deliver an essay consider Dissertation Today. Use the best paper writing service such as killer papers review or even resume services.

4. Predict the lifetime value of customers

E-commerce businesses can benefit from knowing what net profit a customer is likely to bring to the company. Being able to predict the lifetime value of a customer can help with factors such as defining objectives for expenditure, optimizing marketing strategies and deciding cross sell and up sell according to customer purchases.

By using data science models to collect and classify data, e-commerce businesses can predict future buying behavior and have more understanding when formulating business strategies. They know which customers are most loyal and can decide where spending money on advertising etc. will offer the most return on investment.

5. Manage Inventory

Proper management of inventory is essential for e-commerce businesses. When customers are unable to get what they want when they want it, it’s a major deterrent to retaining them. They will simply move on to the next company that can offer this. They want to receive the right goods at the right time and in perfect condition.

The maintenance of the supply chain has become complex today and using inventory data analytics enables businesses to manage inventory effectively. Using machine learning algorithms and predictive analytics enables patterns to be detected that can define inventory strategies.

6. Detect fraud

Living in a digital world where millions of transactions are taking place consistently makes fraud detection essential. Many different forms of fraud are possible and fraudsters are becoming smarter every day.

E-commerce businesses can detect suspicious behavior by using data science techniques. Signs of suspicious behavior could include a shipping address differing from a billing address, an unexpected international order or multiple orders of the same item.

Common data science techniques to detect such behavior include:

-Matching algorithms to estimate risks and avoid false alarms.

-Data mining to address missing or incorrect data and correct errors.

-Clustering and classification to help detect associated data groups and find anomalies.

A fraud detection system helps companies to decrease unidentified transactions and increase company revenue and brand value.

7. Improve Customer Service

A customer is central to any business, especially e-commerce. Personalizing services and giving customers what they really want and need is essential to keeping them happy. Big data analytics offers businesses the potential to enhance their processes so that customers enjoy transacting online.

Natural language processing allows customers to communicate with voice-based bots and data can be stored for future purposes. When businesses know more about their customers and what they want, they are able to devise the best strategies to improve their customer service.

8. Optimize prices

Data-optimized pricing is making some retailers plenty of money. Many online retailers, such as Amazon, Home Depot, Discover and Staples, vary their pricing based on secret formulas. Cost analysis, competitor analysis, and market segmentation are all critical when it comes to pricing.

Pricing of products can impact a business in many ways when it comes to market share, revenues and profits. A key for retailers is to be able to figure out the right price and with big data analytics, they are not only able to determine that number for the market in general but also calculate it with some precision for individual customers.

9. Make online payments easy

Many e-commerce sales are made via mobile platforms and online payments must be secure and safe for customers. Big data analytics helps to identify anything that threatens the process and helps to make online shopping safer.

Various payment options make the online payment process easy and convenient for customers.

10. Determine the quality and reliability of products

E-commerce stores usually provide warranties for products that allow customers to deal with any problems at no cost during the warranty period. Analytics relating to warranty claims can help to determine the quality and reliability of products.

If manufacturers are able to identify early warnings of possible problems, they may be able to address them in time to avoid serious damage to the business.

Text mining and data mining are two techniques that can be used to identify patterns relating to claims and problems with products. The data can be converted into real-time insights and recommendations.

The bottom line

We’ve taken a look at the ten ways that data science models can impact e-commerce. There are so many e-commerce websites and many of them sell similar types of products. Data science helps e-commerce businesses to understand and analyze customer behavior and provide ways to enhance customer service.

When companies understand what they do best and who their loyal customers are by using data science, they are able to improve product designs and customer service, formulate better pricing strategies, manage inventory effectively and provide secure online purchasing and payment options.

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This guest post is contributed by Kurt Walker who is a blogger and college paper writer. In the course of his studies he developed an interest in innovative technology and likes to keep business owners informed about the latest technology to use to transform their operations. He writes for companies such as Edu Birdie, XpertWriters and uk.bestessays.com on various academic and business topics.

The Advantages of Blockchain over Traditional Payments

The Value of Smart Contracts

How Do Smart Contracts Work?

Being Smart About Which Contracts to Convert

Problem 1: Cycle counts

Problem 2: Tracing orders

Problem 3: BOL Paperwork

Problem 4: Communication Boards

Problem 5: Workstations

Problem 6: Shifted Rail Cars

Problem 7: Missing Labels

Problem 8: Data Overload

Problem 9: Packaging Dimensions

Problem 10: Warehouse Space