Data security is in crisis. What was an emerging problem only a few years ago has become the greatest fear of online shoppers, and a major headache for businesses.
In 2016, the cost of card and identity fraud was in the US alone was $16 billion. This is partly due to the fact that such fraud creates additional losses beyond the initial stolen money. For every dollar US merchants lost in card fraud in 2016, they lost an additional $2.40 from chargebacks, fees and replacing merchandise.
The measures taken against such crime can end up costing even more. In 2015, ‘false positives’ (legitimate transactions mistakenly declined as fraud) in the US accounted for almost $118 billion of losses. And almost 40% of cardholders who suffered a false positive decided to abandon that card.
Even so, with worldwide e-commerce sales projected to hit over $4 trillion by 2020, consumers aren’t giving up the convenience of online shopping.
Each of us has an average of 100+ online accounts, and that number doubles every five years. We sign up for everything from e-commerce sites to media streaming services, and online gaming.
At this rate, by 2020 we’ll each be storing valuable personal and payment information in more than 200 places. All this while the number of breaches and hacks continues to rise.
Until recently, the only “solutions” to this growing problem haven’t really looked like solutions at all. Barclays CEO Ashok Vaswani, for example, has acknowledged a growing “digital safety gap,” but his advice was rather basic – such as encouraging people to change passwords regularly.
The fact is, the current model is broken, with organizations responsible for ever-expanding databases of valuable personal records. We don’t just need a fix. We need a new model.
At last, it’s time for some good news. We now have the key to unlock a new model of managing personal data. It comes in the form of a genuinely revolutionary technology: the blockchain.
Blockchain enables direct payments without the need for a central authority – and no central database to tempt hackers. Instead, blockchain uses a ‘distributed ledger’: a record of transactions shared across millions of nodes, with each transaction verified by the users on that network.
Coupled with exceptionally powerful encryption, the distributed nature of blockchain platforms has already put them at the heart of a growing transformation in the way identity information is managed – and by whom.
The concept of “self-sovereign identity” – individuals regaining control over their data – has been gaining rapid traction. In this scenario, you control your own data rather than hand it over to dozens of companies.
Instead, you can validate your identity using the blockchain, which confirms you are who you claim to be. And you can do that with a fingerprint, iris scan or other biometrics – no usernames, no passwords.
The next step is payments. If you can reliably and securely verify your identity using a blockchain solution, you could also use it to verify payment details and complete transactions.
Nuggets is an application built on exactly that premise: being able to make purchases without having to hand over your personal or payment information.
Rooted in blockchain technology, this offers the alluring prospect of never having to remember a username or password again, or tap your details into hundreds of different accounts. It also enables you to transact with cryptocurrencies as easily as traditional payment methods.
These solutions – self-sovereign identity and blockchain-enabled payments – might seem far off. But there are already several start-ups offering secure identity management – and the Nuggets app, which adds payment to the mix, is set to launch in early 2018.
Soon, we won’t have to worry about vast, vulnerable databases of personal information – because they won’t exist. Our identity and payment information will again be our own and we’ll only share it when, and with whom, we choose.
The potential of blockchain technology can’t be overstated. It is, in the words of Dan Tapscott, co-author of Blockchain Revolution, the “second generation of the internet.”
About the Author:
Alastair Johnson, Founder and CEO of Nuggets
Alastair has spent over 25 years as an entrepreneur and innovator, almost entirely in digital innovation: taking big ideas and design through to delivery. With deep knowledge across technical, production and commercial areas, he has led global integrated product development and product marketing for brands like Microsoft, Skype, Office, Xbox, Hololens, Disney, TED and the BBC.