7 top challenges to blockchain adoption in e-commerce industry

Understanding E-Commerce industry

As one is well aware, e-commerce, which comes from Electronic Commerce, involves carrying out a business in goods and services through the internet, using information technology like Electronic Data Interchange or EDI. The e-commerce industry comes with its own bandwagon of advantages, like reduced costs and hassles of management, along with the comfort of interacting with the buyer/seller electronically, thus saving time, energy, and the cost of travel.

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Issues faced in e-commerce today

Like all good things, the e-commerce industry is faced with a multitude of issues that need immediate attention. The biggest challenge when it comes to online trading is the factor of easy mistrust. People can never stop apprehending whether the services are secure, whether it is not prying on some private information on their device, and whether the system shall assure the requisite privacy for its users. These apprehensions, though exaggerated at times, are not completely baseless. Hacking and forgery are very much prevalent over even some of the most secure networks.

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Blockchain and Associated Challenges

In such a situation, blockchain has often been sought after as a solution. However, the probability of its successful adoption into the e-commerce industry is as faint.

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Uncertainty about the uses of blockchain

Blockchain, although one of the most secure forms of technology these days, is not completely hack-free, nor has it become so popular that people start adopting it widely enough for trust’s sake. It is a top challenge to Blockchain adoption in the E-Commerce industry. The primary reason can be assumed to be a lack of communication between the technology providers and the end-consumers regarding the numerous possibilities blockchain holds in the present times.

Priorities of blockchain so far

Besides, another top challenge to Blockchain adoption in the e-commerce industry that has pulled back blockchain from making an impactful mark on the e-commerce industry is that its focus has primarily been more on building systems and networks and less on creating game-changing applications.

Lack of refinement in blockchain

Next, a major drawback of blockchain adoption in the e-commerce industry is that it lacks a certain degree of refinement. As blockchain is yet to set a major foot in the era of advancement and is no more than an experiment in several corners of the world, there is certainly a whole lot of room for improvement and refinement, which makes it not precisely suitable for e-commerce, at least for the time being.

Low transaction rate in blockchain

Besides, blockchain has a really low transaction rate, as low as 7 transactions per second until some time ago. At such a low rate, it is impossible to use it as the medium of exchange for the hundreds and thousands of commercial transactions that take place per second on e-commerce platforms, such as shopping websites.

Fear in the adoption of blockchain

The biggest roadblock in the way of the adoption of blockchain into the mainstream e-commerce industry is fear, something that even the e-commerce industry was not devoid of until a few years back. The concepts of decentralization, extreme transparency, and cryptocurrency do not fail to scare the user, for the user hasn’t used such a novel platform before to be able to trust it. Also, blockchain technology does not come with many well-defined applications to be able to communicate its facilities to the user that easily.

Expense of blockchain

There is no doubt about the fact that blockchain technology is a very cost-effective solution to many problematic business models today. In the long run, there are many benefits to reap from the system and it is definitely a revolution in the truest sense of the term for the biz world.

However, one cannot deny the fact that blockchain is expensive in terms of completely overhauling existing systems and practices and replacement. This prevents many smaller companies from applying blockchain for rendering services even though the benefits are desirable. A company needs minimum resources to be able to afford the setup of the technology in the first place, a character lacking in many smaller commercial ventures. This makes the technology viable only for a handful of platforms.

Lack of awareness about blockchain

Any platform requires awareness for popularity and acceptance. Unfortunately, the same is not the case with blockchain technology, at least in the present situation. Being an innovation that is not really old, it needs more time for settling in with the masses. Whatever little idea people have of the blockchain is not sufficient to allow one to adopt it easily enough, for the platform it is being conceived for is one that is probably few of the largest these days.

Besides, one cannot deny the fact that the lesser known and accepted a technology is, the lesser are any chances of developments and improvements of any kind. That is not a favorable situation either, considering one always needs upgrades and improvements for better user interception and reception for a platform that caters to so many diverse and demanding users at the other end. Blockchain falls short of its expectations in such instances.

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Is Blockchain really that harmful?

In reality, the adoption of blockchain in the e-commerce industry would do much more good than harm. For an industry grappled with poor tracking facilities, non-standardization, and a centralized mechanism of distribution and service, blockchain is like a boon for it helps get rid of all these vices. With a transparent yet secure network of functions, blockchain assures minimum failure with respect to delivery and errors.

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Conclusion

There are quite many challenges facing blockchain’s adoption in the e-commerce industry right now, but it is not like there is no dawn of hope on the near horizon. If it is treated as a nascent technology, there is enough room for gradual but steady development in the course. With the adoption of necessary changes, some core modifications and improvements, and more suitable applications, blockchain can really prove to be a state-of-the-art intervention in the field of e-commerce.

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Quoted in and contributed to 50+ national & international publications (Bloomberg, FirstPost, SwissInfo, Outlook Money, Yahoo News, Times of India, Economic Times, Business Standard, Quartz, Global Legal Post, International Bar Association, LawAsia, BioSpectrum Asia, Digital News Asia, e27, Leaders Speak, Entrepreneur India, VCCircle, AutoTech).

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Working closely with patent attorneys along with international law firms with significant experience with lawyers in Asia Pacific providing services to clients in US and Europe. Flagship services include international patent and trademark filings, patent services in India and global patent consulting services.

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Blockchain ecosystem in India is evolving at a rapid pace and a proactive legal approach is required by blockchain lawyers in India to understand the complex nature of applicable laws and regulations.

Blockchain Use Case for KYC and AML

Business and Technology Updates

KYC and AML Blockchain use case

There have been several incidents in the recent past that have prompted over and over again the need for an amplified, robust, and highly efficient system of security in terms of banking and finance. Crimes related to the above have increased like never before. They are as frequent and small-scale as duping and forgery, to as serious and lethal as money-laundering and massive terrorist attacks aided by duplication of identity. The current times mandate the urgency of having a system that allows banks and other public organizations to regulate and monitor with more efficiency the processes of verification and identification of customers and clients, no matter from which corner of the world. One very good example of achieving the above is KYC.

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What is blockchain KYC?

As one is well aware, the KYC (Know Your Customer) norms require every customer of a bank to verify his identity by submitting acceptable proofs, as mandated by the respective bank, organization, or government. Usually, this includes a legitimate proof of identity and one for a residential address. Thereafter, there is a sequential procedure for procurement, tracking, and maintaining storage of huge chunks of data related to each customer for timely updates, monitoring, and efficient handling.

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Blockchain for KYC

It seems to be a very doable job, even without any complex technological systems such as blockchain KYC and with simple, less-efficient databases. The real catch is that with the world turning into a global village, international transactions are every day, if not every-minute affair. People settled away from their families and made transactions daily for personal affairs. Businesses that function as multinational corporations or cater to international customers make a huge number of cross-border transactions daily. With the social media leap, many people cater to international audiences, often for paid services. Huge chunks of data from every corner of the world are flowing every minute and need regulation and monitoring, lest some illegal or criminal activity crops in.

This is where the urgent requirement for a platform that can help in the management of huge chunks of data without compromising on efficiency or security comes into the picture, and the answer lies in blockchain.

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Combining the Best of KYC and Blockchain

With KYC emerging as one half of the solution for the above issue, blockchain is undoubtedly the necessary complement to it. While KYC assures customer identification and admission and safe regulation of banking and finance activity while minimizing the risk quotient, it fails to provide the necessary standardization for application to a wide number and variety of banks. At the same time, it can have a negative impact on end-user relationships because of its stringent regulations and reduced transparency. This is where blockchain KYC steps in with its guaranteed efficiency and security despite improved transparency.

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Decentralized KYC

The biggest advantage of blockchain KYC is the power of decentralization, and this is what is making financial organizations take a keener interest in the technology for problem-solving. Besides, because the network functions as a distributed ledger in the public domain, every user has a particular cryptographic key for access and interaction. Banks have the option of going with either a public or private blockchain, and the difference lies in the sharing and control of data either internally or across multiple institutions.

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How does blockchain-based KYC work?

The technology combines the best of KYC and blockchain, and the procedure takes into consideration the best of both. Initiated by the verification of documents submitted by a new customer on the ecosystem, this data is uploaded on the blockchain network by the respective bank. As soon as this is done, automated cryptic updates are enabled by the ledger, even when data is amended or appended in the future. Because of the blockchain, the data can be accessed by authorized signatories as per requirement, while the customer is provided with a secure and unique verification mode for future transactions.

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Merits of the Blockchain KYC system

As is already clear from the above elaboration, the system is smooth, secure, transparent, and efficient, thanks to the blockchain KYC it uses. Besides these, there are other advantages this system provides, which are:

Speedy

This mechanism can be a game-changer because of the minimized turnaround time the procedure would take, thereby ensuring efficiency for institutions. Besides, the lesser time taken, the more hassle-free the procedure would be.

Efficient data monitoring for AML

Any fixes or modifications to data, either requested or directed, can be handled with ease due to better monitoring and amendment means. This ensures reduced scope for forgery and misuse of data, which are certainly expensive to users as well as banks. Besides, the blockchain allows better governance of data now that they are stored homogeneously, again improving security against money laundering (Anti-Money Laundering or AML) better.

Standardization

If there was one issue KYC couldn’t solve, it was standardization. Blockchain protocols ensure this caveat is worked upon and a homogenous platform is created for all transactions and related data.

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The future of the blockchain KYC

Implementation of blockchain technology with KYC is not something new these days, with quite a few companies and organizations beginning to follow this approach. KYC Chain and Cambridge Blockchain, for instance, have worked on real-world products, and these programmed models are available as trials for implantation and witnessing their function. The primary aim is to convince or rather attract banks and institutions to take up the model, even if on a trial, and see for themselves if common issues revolving around regulation and monitoring of important data can be solved.

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Blockchain in financial services

Blockchain in financial services models can prove extremely useful for countering terrorist activities that usually begin by carving a path into financial institutions through fake identities for the procurement of data and money. The combination of the two can also prove to be cost-effective in terms of the process, while at the same time fulfilling the number one priority when it comes to banking: security. Without a mention, interoperability between multiple institutions becomes easier—a compelling argument to put forward for continuation in the field.