4 Ways Blockchain Could Impact DTC Ecommerce

The term ‘blockchain’ is everywhere right now. Journalists are predicting it will either kill traditional ecommerce or be the future of ecommerce. But that doesn’t answer one of the most common questions in the ecommerce space: what does blockchain mean for retailers selling across borders?

Firstly, what does blockchain mean?

Blockchain technology is a decentralised digital ledger of transactions, specifically designed to record everything that goes in into the final transaction, i.e. information is publicly available but blocked behind an impenetrable code, making it one of the safest ways to transact money. Although blockchain is typically associated with Bitcoin, it is now recognised in ecommerce.

Blockchain and cryptocurrencies offer a number of solutions to cross-border brands’ issues, and over time, as more retailers implement these technologies, the benefits will increase.

Here is a quick overview of how blockchain will impact cross-border ecommerce:

1. Cross-border payments

Because cryptocurrency payments are truly borderless, it makes no difference whether a shopper is buying from a local merchant, or one on the other side of the world. On top of that, there is no delay in clearing a payment, as it’s all done automatically. This is a significant reduction considering the average time to complete a cross-border transaction is three to five business days, according to McKinsey research and analysis (2015). Global retailers are also always looking for new ways to reduce the cost of foreign exchange and payment processing fees, which can often be 2-3% of a total purchase. Cryptocurrency transaction fees are a fraction of this cost, because the process is entirely automated.

2. Supply chain

Supply chain is one of the most important parts of cross-border ecommerce. Data validated on the blockchain network is virtually incorruptible, solving a key problem facing logistics providers all over the world. An incorruptible blockchain network provides a transparent supply chain where shoppers can see the flow of the products they buy, in turn increasing their consumer confidence.

Recently, Alibaba’s T-Mall platform is adopted blockchain technology in its cross-border supply chain through a partnership with logistics company Cainiao. This means information on goods for import and export is now in a blockchain that can then track their country of origin, shipping port and method, arrival port as and customs report details.

3. Data security

Another big issue facing cross-border retailers lies in how data is stored in existing ecommerce platforms. With varying legislation, and the introduction of GDPR in the EU, large amounts of data need to be carefully stored and collected, however in their current state on centralised servers, this data is vulnerable to cyber threats.

However, with a blockchain based platform, it is virtually impossible for a retailer to be the victim of a cyber-attack because customer data within the blockchain is decentralised, i.e. not held in one server. This means retailers can focus on selling internationally, rather than spending time on ensuring the constant flow of new shopper data is safe.

4. Chargeback fraud

Cryptocurrency creates irreversible transactions, which put an end to fraudulent chargebacks, a common issue plaguing cross-border retailers. Currently, there is no centralised payment processor to reverse transactions, which means credit card companies and banks frequently side with the customer, leaving the retailer out of pocket.

This type of fraud occurs when a customer falsely files a dispute with his/her credit card issuer for a payment reversal, despite receiving the item.

With blockchain, retailers would be able to decide whether to refund a payment, based on a number of factors, instead of the typical blanket response from a card issuer.

Blockchain, as it continues to develop, will increasingly become more desirable for international retailers. Those who want to add transparency to transactions, manage their consumer data safely, provide shoppers with more visibility into their deliveries and eliminate fraudulent chargebacks should continue to research blockchain’s evolution and decide on if they want to implement it into their cross-border strategy.

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