It goes without saying that buying things on the Internet poses certain risks, which can be especially worrying depending on which payment method is being used. While popular online services like PayPal let users buy things through a credit card — and offer a certain level of protection — bank transfers are still very insecure in that regard. Escrow systems through smart contracts are the way to go, rather than trusting people or relying on auction sites like eBay to make sure funds are returned to the rightful owner.
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Ebay Purchases via Bank Transfer is Risky
A very worrying story was posted on Telegraph UK, where one eBay user reported how he lost in excess of 5,000 GBP in one transaction. He saw a car on sale on the auction site, and decided to purchase it as a gift for his daughter. Such large transactions can not be completed through PayPal properly, so the user decided to pay with a bank transfer.
This is where one of the major flaws in the financial ecosystem is discovered, as refunding a bank transfer is not something that can be enforced upon by banks. Only if the account has been hacked, and funds has been sent without consent from the original owner, funds can be restored in some cases. Even so, it will take weeks, if not months, to settle the refund.
When users pay for an item or service on their own accord, they are fully responsible for any financial losses. While one can easily go to their bank office and request a refund for this transaction, chances are slim to none it will actually be granted. Once it becomes clear the account owner sent the funds willingly, the discussion ends there. An eBay spokesman told the Telegraph UK:
“Fraudsters use very sophisticated methods to try and imitate trusted websites, but transactions completed outside eBay’s platform aren’t eBay transactions.”
“This includes purchases completed following emailed instructions to transfer money to a bank account,” the spokesman added.
Granted, consumers have to be more wary of who they send money to, especially when the amount is quite substantial. However, there is also the pressing issue of not being allowed to pay for large purchases in cash anymore, which means people will have to rely on options like bank transfers to settle payments.
There is not much that can be done when consumers send funds willingly, regardless of the outcome of the transaction in the end. While banks can close the recipient’s bank account after being alert of the fraud, it still takes a few days until this happens. This gives fraudsters ample time to move the funds around, by either sending to a different account, withdrawing the cash in bunches, or using it to buy things online.
Furthermore, it is impossible for banks to determine whether or not a newly opened account will be used for fraudulent purposes. If the documentation provided is genuine, there is no reason to refuse the bank account opening to a new customer. Once the money from the recipient’s account is spent, the investigation is handed over th to the police, although there is very little they can do.
Blockchain-Powered Escrow Systems Provide Greater Security
Regardless of how people view the system employed by eBay and other auction sites, there is no proper protection in place for both buyer and seller at the same time. Even intermediary services like PayPal will offer buyer protection or seller protection, depending on the type of transaction, but never both every single time.
A solution has to be created to make sure events like these can be prevented, which is where the blockchain would come into the picture. By creating an escrow system that protects both buyer and seller, there is no reason to try and attempt fraudulent schemes, as there is no way funds will be given to you unless the transaction is completed and both parties are satisfied.
However, the blockchain offers something else as well, as there would be no human interaction involved in the escrow process. By employing smart contracts, data-driven computer algorithms will verify the authenticity of any transaction, and wait for confirmation from both parties before releasing the funds. As this is all based on a computer making the decision, there is no element of corruption involved.
The blockchain will play a major part in everyday lives of consumers all over the world, and e-commerce is one of the biggest areas to benefit from this technology. With people doing business all over the world, more secure systems have to be created to keep customer’s funds and goods safe at all times. The blockchain can provide exactly that service, and so much more.
What are your thoughts on the development of an escrow system for popular auction sites like eBay? Will the blockchain play a big role in the process? Let us know in the comments below!
Source: Telegraph UK
Images courtesy of Shutterstock, eBay