The Need for Blockchain to Monitor Payment Processes and to Eliminate Fraud

In 2017, the World more or less applauded a woman who raised money on a GoFundMe page for a homeless man who paid for her gas. Yes, the news was like a breath of fresh air - a massive progress for humanity! Little did we realize that this will lead to the exposure of fraudulent schemes.

In September 2018, a major news outlet  reported that the homeless man was yet to receive the amount raised on his behalf. The woman, however, said she was withholding the money until he curbs his drug addiction. In a recent ruling by the court, the Judge has demanded the full accounts of how the money was spent, before judgment was passed.

Shocked? Hold on! This case is just a small percentage of the total amount of misallocation of funds that happens unnoticed. In addition to this, Bloomberg released an exposé on the emergence of donor-assisted funds (DAF), and how it's been used as a cover for tax evasion and money-laundering under the guise of charitable funds. It's undeniable that there are more cases of fraud than ever before, despite the massive strides we've made in technological advancements. Today, people's trust levels of traditional financial institutions is still recovering. It is, therefore, not a surprise to see keen interest of financial players investing heavily in emerging technologies that will boost trust levels. World Wide Generation (WWG) is a blockchain-enabled financial platform created to bypass the inconsistencies and loopholes that plagues payment processes all over the world and supports transparency. The WWG platform maps, monitors, measures, manages and markets best practice and accountability.

The GoFundMe page and the DAF inconsistencies are just a tip of the iceberg. According to a study by the Association of Certified Fraud Examiners, a typical company loses about 5 percent of revenues to fraud every year.

In the last few decades, there has been reports of exponential increase in the rate of fraud being perpetrated in every facet of our daily activities; billions are lost every year to fraudulent practices and transactions. According to a recent report by Forrester Research, an estimated 68 billion dollars were lost to security breaches in 2016, alone. Even Know-Your-Customer (KYC) and Anti-money laundering (AML) regulations have been rendered powerless. Financial institutions are at their wits end on how to tackle online fraud in every walks of life; from those perpetrated by high-stake financial power players to those performed by the everyday Mr & Ms Smith. With the target to achieve the Sustainable Development Goals (SDGs) by 2030 looming near, it is especially important that funds being deployed for sustainable projects, addressing areas most in need, reach intended beneficiaries to ensure the global goals are met.

This begs the question - how can payments track the flow of funds in order to curb fraud? Well, the answer lies in the vast potentials of Blockchain technology. Blockchain is one of the core disruptive technology that's predicted to restore the lost trust in financial processes. Over the years, Blockchain technology has progressed beyond the promise of a peer-to-peer electronic cash system; it has diversified and solidified its application in many aspects. More so, its impact on tracking payments is of great appeal in the financial world; where you can effectively track payments and cut out unfavorable policies by middlemen. Most importantly, this technology helps to boost trust in online payment processes. It has the ability to expose fraud. So, let's take a look at the features of blockchain technology that make it an indispensable asset in the elimination of fraud.

Blockchain's Decentralised Platform

In centralised systems, fraudsters can easily cover their tracks by altering or deleting vital information in a company's database. It's also easy for them to change paper or electronic documents to erase any history of their nefarious activities. However, with blockchain's distributed ledger technology, users are assured of complete transparency in any transaction carried out on it.

Blockchain technology is a truly decentralised system; it nullifies the negative effects of a central point of failure in a system. Blockchain's distributed ledger system helps to eliminate fraud and increase visibility.

Every stakeholder in a blockchain transaction can view the history of a transaction and effectively track the transfer of assets. For an individual to tamper with transaction records on the blockchain, he/she must control a significant portion of the blockchain network. Since this system is so vast, it is practically impossible for anyone to tamper with transaction records.

Blockchain's Immutability

This feature is vital in boosting trust levels since every transaction carried out on blockchain cannot be erased or deleted. Blockchain transactions are immutable. Therefore, before a "block" of transactions is added to the blockchain network, there must be a consensus between the network participant that the transaction is valid. The block is secured through cryptography and given a time-stamp before its added to the previous chain. With this system, you can restore trust levels by tackling the problem of fraud and counterfeiting. Imagine a process where you can check the provenance of an asset, including where it's been, and where it came from.

Cryptocurrencies, such as Bitcoin and Ethereum, could improve the transparency issues and fraudulent practices facing financing of charities or other entities. With blockchain technology, the audit trail of funds is easily tracked. Charities like Opakeco are already utilizing blockchain technology to provide an audit trail of all their transactions. This system assures donors that their funds are properly utilized by the charity. The system could also, conceivably, be used to fund SDG focused projects.

Blockchain's Permissioned Network

The threat of online fraud through identity fraud has spurred many financial institutions to alert customers when suspected fraudulent activities are being carried out on their account. However, most financial institutions are still incapable of detecting every fraud that's performed on their platform. In fact, according to a global study carried out on banks by IBM Institute of Business, only 16 percent can detect fraud as it is attempted. So, what if a person's digital identity could be secured, and impervious to tampering or security breaches? This is where Blockchain's permissions comes in.

Permissioned networks are highly effective against fraud because they dictate who is allowed to participate and in what capacity. Members of a permission network must be approved and validated before they can come onboard. These members are granted cryptographic membership cards as a form of identification on the network.

The drastic decline of trust in the transfer and tracking of funds is a problem that cannot be ignored. The rate of security breaches and fraud is not only costly, but it damages organisations and consumer relationship. It is clear blockchain technology has the capability to reduce fraud within payment processes. WWG is already exploring the capability of blockchain to restore people's trust in online financial processes. G17Eco, the platform powered by WWG, delivers transparency in client data through collecting, reporting and validating data on the platform, where an immutable and credible entry is created. The platform aims to tackle fraud within Investing by securing transparency and accountability and thereby, achieving successful funding for SDGs project leading to a more sustainable world beyond 2030.