by Lumai Mubanga
Part one under this heading focused on how blockchain could ultimately win the trust of millions of clients from traditional third-party service providers. We discussed how content distributers like Facebook could be replaced with blockchain-based token oriented platforms in the very near future.
This article will focus on some other third party based payment systems and how their existence could be threatened because of the unrelenting conquest launched by block chain.
You may be one of those loyal customers who purchase items from eBay, Amazon and other online stores. You probably enjoy the convenience offered by third party merchants. However, these systems sometimes create room for loss of trust. These systems sometimes fail at the most critical moment when you really wanted to make that all-important purchase. How has the history of third party payment systems fared in terms of harnessing the trust entrusted to them by millions of customers? How could the solid trust offered by blockchain shift that trust and threaten their existence?
Online Payment systems
The best well know online payment systems are Authorize.net and PayPal. While they have different business models, they both thrive on either charging setup or transaction fees as the case may be. For example, authorize.net charges, “has a $99 setup fee, costing $20 per month and takes a $0.10 per-transaction fee”, according to the Authorize.Net pricing web page. With a customer base of about 300,000, the company boasts of billions of dollars in net worth.
Paypay on the other hand has “transaction fees at 2.9% + $0.30 per transaction and has no setup or monthly fees”, according to PayPal merchant fees web page. The 2019 fiscal year report shows that PayPal earnings were close to US$2.459 billion, a significant part could be from the transaction fees we pay for our services.
Outages and mistrust
While all systems are bound to fail at one time or another, the timing of such failures and related costs to consumers is what matters most. Authorise.net experienced cyber-attack in 2004, which caused over 200,000 customers to fail to process their credit cards. The attack lasted for over a week and many clients were unhappy.
Paypay on the other hand experienced what the service status page referred to as a “service disruption”. Nearly 84% of customers “reported problems to log in while 13% complained about issues with sending payments”, as reported by the Sun online paper. In addition, all this happened on Black Friday of 27th of November 2020! One can only imagine the frustration clients felt, whatever the cause of the disruption.
Can Blockchain put an end to this?
On the first instance involving Authorize.net, it’s practically impossible for Cyber attackers to disrupt distributed network that is immutable. In the second instance, it is possible that smart contracts can be automated to execute these transactions on a specific day like black Friday to avoid customers missing their much-awaited black Friday purchases. Indeed, blockchain has potential to win the trust of all as its aim is essentially transferring trust from an intermediary to technology. The treat is real.