Pay with TRIO: The E-Commerce Breakthrough.: By Eli Talmor

Finextra

3 days ago

E-Commerce and Fraud: Lack of Trust.
Online shopping offers unparalleled convenience, transforming how goods and services are purchased. This digital accessibility, however, also presents a fertile ground for fraudulent activities, impacting millions of individuals annually and resulting in significant financial harm. The sheer volume and speed of online transactions make them an attractive target for malicious actors, who constantly evolve their deceptive tactics.
The global digital payment landscape is experiencing a period of explosive growth, with e-retail sales projected to approach $8 trillion by 2025.
This rapid digital transformation, however, presents a significant paradox. While it undoubtedly offers unparalleled convenience and economic growth, it simultaneously creates an expanding attack surface for malicious actors, resulting in a concerning escalation in fraud losses. The inherent nature of online transactions, particularly the absence of a physical card, introduces higher fraud risks compared to traditional card-present scenarios. This structural difference makes Card-Not-Present (CNP) fraud a dominant concern, accounting for a substantial portion of all card fraud, exemplified by its 85.3% share in the UK. The very factors driving digital adoption thus amplify the necessity for robust security measures, initiating a continuous and dynamic contest between technological innovation and efforts to prevent fraud.
The Significant Financial and Reputational Impact of Online Payment Fraud, Particularly from Stolen Payment Cards
Online payment fraud poses a severe and multifaceted threat, resulting in substantial financial losses for both businesses and consumers globally. Projections indicate that global card fraud losses are anticipated to reach $40.53 billion by 2027, with e-commerce businesses alone facing an estimated $48 billion in losses to online payment fraud in 2023. The financial ramifications extend beyond direct monetary losses; for every $100 in fraudulent orders, businesses incur an additional $207 in indirect costs, encompassing chargeback fees, processing fees, and various operational overheads associated with fraud management. The United States, in particular, experiences exceptionally high rates of payment fraud, with reported losses increasing by 38% to $12.2 billion in 2024.
Beyond the quantifiable financial damage, fraud severely erodes customer trust and significantly tarnishes brand reputation. A compelling study highlights this long-term impact, revealing that 47% of consumers would permanently cease shopping with a retailer following a data breach involving their payment card information. This observation underscores that fraud prevention strategies are not solely about protecting immediate revenue streams but are critically important for maintaining brand integrity and fostering customer loyalty, which represent intangible yet vital long-term assets. Businesses must therefore recognize that investments in robust security are fundamental to preserving their market standing and consumer relationships.
Problem 1: Mistrust in Sellers.
The Federal Trade Commission (FTC) alone documented nearly 266,000 cases of online shopping and negative review scams in 2023.
Problem 2: Mistrust in Buyers.
Businesses are losing money to Fraud-$10.6m average annual loss to fraud per merchant.. The latter sees the potential threats both from Consumers as well as Professional fraudsters.
These threats include:
Online payment fraud
The use of stolen cards by fraudsters:
A fraudster takes control of a credit or debit card account to make unauthorized transactions. Card-not-present fraud: An unauthorized person uses stolen card details to make online purchases. Card skimming: Devices capture card information at ATMs or point-of-sale terminals, such as at gas pumps.
Chargeback fraud
False claims for chargebacks by consumers:
False claims for chargebacks, also known as chargeback fraud or friendly fraud, occur when consumers falsely dispute legitimate transactions with their credit card companies to get a refund while keeping the purchased goods or services. This practice exploits the chargeback system, designed to protect consumers from unauthorized or fraudulent transactions, for personal gain.
Account takeover attacks
Account takeover attempts by criminals:
Account takeover (ATO) attempts involve criminals gaining unauthorized access to online accounts, often through stolen or compromised credentials. This type of fraud can lead to financial losses, identity theft, and reputational damage for both individuals and organizations.
Supplier, partner & seller fraud
Supplier fraud by criminals:
Supplier fraud, also known as vendor fraud, is a type of fraud where criminals deceive businesses by impersonating legitimate suppliers or creating fake ones to steal money. This can involve sending fraudulent invoices, diverting legitimate payments, or using stolen identities to appear as a genuine supplier. These schemes can be sophisticated, involving detailed research into a company's procurement processes and even insider collaboration.
Refund abuse
False claims for refunds by consumers:
Also known as return abuse, refund abuse is when a customer requests and receives a refund for a purchase they claim was incomplete or unsatisfactory. In essence, they are taking advantage of the merchant's returns policy and goodwill in order to benefit.
Promo, voucher & policy abuse
Promo abuse by consumers:
Promo abuse by consumers refers to the act of exploiting promotional offers beyond their intended use, often by creating fake accounts or using multiple accounts to repeatedly redeem discounts and bonuses. This can involve taking advantage of sign-up incentives, referral bonuses, loyalty discounts, and other promotions designed to attract new customers or reward existing ones.
There is a need to re-establish Trust between Buyers and Sellers.
Stablecoins vs. Fiat for E-commerce. Pros and Cons.
Stablecoins Pros.
Stablecoin transactions are significantly faster than traditional methods, often confirmed in seconds or minutes. This near-instantaneous settlement drastically reduces delays, especially for high-volume or international transactions, leading to improved fulfillment speeds and higher customer satisfaction. Operating on blockchain networks, stablecoin payments are available 24/7, bypassing the limitations of traditional banking hours and weekend closures.
Reduced Transaction Costs and Fees (including cross-border)
Stablecoin transaction fees are typically much lower compared to those incurred with traditional payment methods like credit cards or wire transfers. For instance, while credit/debit card processing fees can range from 2% to 3%, stablecoin transfers can incur nominal fees of a few cents. Shopify's integration of USDC offers merchants their standard Shopify Payments rate, but with a rebate of up to 0.50% on USDC orders and no additional fees for international transactions. Stablecoins can eliminate foreign exchange and multi-currency conversion fees, either by allowing merchants to receive funds in their local currency without extra charges or by enabling them to hold USDC directly. A key financial benefit for merchants is the elimination of chargeback risks due to the irreversible nature of blockchain transactions. This contributes to more consistent cash flow and simplified financial planning.
Traditional e-commerce payment methods, especially credit cards, impose significant transaction fees (1.5% to 3.5% per transaction) and carry the risk of chargebacks, which directly impact profit margins and financial planning. Stablecoins offer much lower transaction fees (a fraction of traditional fees) and eliminate chargeback risks. Specific examples, such as Compass Coffee aiming to save 3.75% on credit card fees and Shopify offering rebates on USDC orders, quantify these potential savings. The direct and quantifiable reduction in operational costs (lower fees, no chargebacks) provides a powerful and immediate financial incentive for e-commerce merchants to adopt stablecoins. For businesses, these economic efficiencies can outweigh some of the current complexities or consumer adoption challenges, making stablecoins a strategic choice for optimizing financial operations.
Expanded Global Reach and Financial Inclusion
Stablecoins facilitate fast, borderless payments, effectively bypassing the complexities and uncertainties of fluctuating exchange rates and reducing overall transactional complexity. This capability significantly broadens a business's potential international market reach. They enable businesses to engage with a vast global audience of cryptocurrency users, estimated at over 400 million worldwide. Stablecoins offer a faster and more cost-effective solution for cross-border remittances, promoting greater financial inclusion for populations who are unbanked or underbanked, particularly in developing economies. Real-world examples include Mercado Libre using USDC to pay suppliers in Brazil and Mexico, which streamlined payments and reduced costs compared to traditional bank transfers. SpaceX also leverages stablecoins to repatriate funds from Starlink sales in countries with highly volatile local currencies, such as Argentina and Nigeria, demonstrating their utility for wealth preservation
Cross-border payments and remittances through traditional fiat systems are often characterized by high fees (6-10% for remittances), slow settlement times (1-3 days), and limited accessibility, especially in developing economies with underdeveloped banking infrastructure. Stablecoins drastically cut remittance costs (to less than 1%), enable instant transfers, and provide USD-pegged stability in volatile markets. They offer a digital alternative for the unbanked, allowing for USD-denominated accounts globally. The impact of stablecoins extends beyond mere transactional efficiency; they are fundamentally reshaping financial access and economic resilience in emerging markets. By offering a stable, globally accessible digital currency, stablecoins provide a practical and often superior alternative to volatile local fiat currencies and expensive, slow traditional cross-border services. This empowers individuals and businesses in these regions to participate more effectively in the global digital economy, fostering financial inclusion and potentially driving grassroots economic growth by bypassing legacy banking bottlenecks. This points to a significant socio-economic transformation, not just a technological upgrade.
Blockchain-Enabled Security and Transparency
Payments conducted via stablecoins, leveraging blockchain technology, inherently provide a degree of transparency and enhanced fraud protection. Transactions are encrypted and verifiably recorded on an immutable public ledger. Issuers of stablecoins typically aim to provide transparency regarding the assets backing their tokens, which is intended to foster trust and confidence among users. For instance, Circle, the issuer of USDC, is known for providing monthly attestation reports from independent accounting firms, which enhances perceived transparency.
While the underlying blockchain technology offers inherent transparency for transaction records, the actual transparency and trustworthiness of stablecoins, particularly fiat-backed ones, are not automatically guaranteed. They heavily depend on the issuer's commitment to verifiable proof of reserves and adherence to evolving regulatory standards. Research highlights "Transparency Concerns," noting that some stablecoin issuers have failed to provide sufficient proof of valid audits for their reserves, leading to a degree of mistrust. Recognizing this gap, regulatory bodies are increasingly demanding audited reserves. For example, the EU's Markets in Crypto Assets Regulation (MiCA) specifically mandates that issuers of e-money tokens and asset-referenced tokens maintain reserves to fully back stablecoins, manage them properly, and ensure redeemability at face value. This suggests that "blockchain transparency" is a necessary but insufficient condition for overall stablecoin transparency; robust regulatory oversight and consistent, independent auditing of reserves are equally, if not more, critical for building widespread user confidence and mitigating systemic risks.
Comparative Transaction Costs and Speeds:
Comparative Transaction Costs and Speeds
Stablecoins Cons:
Consumer Protection: Fiat (credit card) vs. Stablecoin.
It is obvious that stablecoin offers a great advantage in terms of transaction cost and speed will lag behind fiat in terms of fraud protection.
It is therefore only natural to incorporate stablecoins into Pay with TRIO, thus offering unprecedented transaction cost, speed, and fraud protection for buyers and Sellers worldwide.
Pay with TRIO offers: