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Three ways blockchain is transforming payments

By Stefano Bettinelli, Head of Innovation, MultiPay Group

“Caring is good, authentic is better, but dependable is best”

Carlos Guerrero, Senior Director, Advisory, Gartner

When it comes to building customer trust, Gartner research reveals three key potential drivers; warmth, authenticity and dependability. Of these, the most important factor is dependability. In fact, Guerrero describes dependability as the untapped opportunity for most organisations.

From my point-of-view, this is where blockchain steps in. The very nature of the technology lends itself to trust by providing the opportunity to build secure platforms for traceable and reliable transactions. For most brands, and especially retailers, it’s a revolution for the way they handle arguably the most important aspect of the customer experience – payments. 

Cryptocurrencies based on blockchain technology are essentially universal currencies and, in theory, can be in any country or sector you trade in. There’s growing consumer appetite as well. Research by Visa indicates that just over half of consumers have a strong interest in crypto-linked cards that link to digital currency balances and allow them to pay through such methods. This opens significant opportunities and choice for retailers and merchants to embrace consumers wanting to make use of alternative payments. 

So, what are some of the ways blockchain is changing the payments landscape? And how can businesses use blockchain to gain customer trust and be seen as more dependable?

Using NFTs to tackle counterfeiting

Firstly, let’s visit a topic getting increasing visibility in the headlines, non-fungible tokens – or as they are more commonly known, NFTs. When it comes to building brand trust and dependability, NFTs have a critical role to play in tackling the estimated trillion-dollar counterfeiting industry.

For instance, Luxochain provides a pioneering integrated payment and blockchain solution for verifying the authenticity of products in the luxury, retail, and pharmaceutical industries. 

Blockchain offers a unique opportunity for brands to re-take control by connecting electronic tags inserted into a product at the point of manufacture with an NFT. By doing this, every product a brand sells has a unique digital fingerprint on the Luxochain blockchain. Once the product is purchased, this NFT is then transferred to the customer and stored in their Luxochain app. At a later stage, the NFT can easily be passed on if the customer decides to resell the product to ensure a verifiable chain of ownership back to the original manufacturer. 

With research by Incopro indicating 66% of consumers who unintentionally buy counterfeit goods lose trust in buying from that brand again, the use of NFTs is one way to significantly increase confidence in the authenticity of the products being bought.

Pioneering the future of donations

The secure, transparent nature of blockchain also lends itself perfectly to the charitable sector. Forward-thinking charities such as The Water Project and The Rainforest Foundation readily accept digital currency donations to ensure they are open to as many fundraising options as possible. It’s certainly catching-on too, with over $2.4m worth of cryptocurrency donated to charities by the Giving Block platform on ‘Crypto Giving Tuesday’ in 2021.

For charities, the bonus is that they can accept payments and boost income securely, transparently, and globally without paying restrictive exchange and transaction fees. For the donor, it builds trust in the charity by providing a clear trail that their gift through blockchain is going towards its intended purpose.

Reducing the friction of cross-border payments

Often associated with high transaction fees and delays, another critical use of blockchain is for cross-border payments – crucial for growing international brands. Currently, it’s no secret that the sending of money between territories can be a tedious and complicated process. Blockchain can immediately remedy this by connecting disparate international financial institutions, sellers, and consumers. Cryptocurrencies enable faster transactions between these parties more efficiently and with either very low or zero transaction fees.

In addition, the rise of stable coins enables users to benefit from the transparency and security blockchain offers especially in a cross-border scenario, where traditional transfers often necessitate multiple intermediaries, high fees, and may be vulnerable 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 low volatility compared to other cryptocurrencies.

Looking ahead

Payment technology is in an almost constant state of innovation as brands look to improve the customer experience, enhance reputation, enter new markets, and make significant cost-savings. Blockchain is truly revolutionary in all these key areas. However, whilst we are close to wider adoption, it’s important to remember that traditional methods of payment will continue to dominate the landscape for at least the immediate future. There are still many obstacles that need to be overcome – from the environmental impact of blockchain technology to the easing of regulations and compliance. In the meantime, continued innovation in the space will mean blockchain continues to prove itself in helping retailers and other merchants build great customer relationships and future-proof their brands by becoming more dependable.

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