Tackling Chargeback Fraud in Africa with Blockchain-Powered Solution

By 25 March 2024No Comments

Chargeback fraud poses a significant threat to Nigeria’s electronic payment ecosystem. Estimated to cost over $25 billion globally by 2025, this menace results in substantial losses for merchants and financial institutions. At Zone, we recognize the urgency to address this issue along with many other problems that the financial service industry is plagued with. To expose the true impact of chargeback fraud, we partnered with a leading media research company to conduct an in-depth analysis. Our report uncovers the alarming trends, the reasons behind the rise in fraud, and most importantly, how businesses can protect themselves using blockchain powered payments.

Key Findings from the Report

  • The Staggering Cost: In 2023, chargeback fraud cost businesses worldwide a staggering $41 billion. This number is only expected to rise, posing a significant threat to a company’s bottom line.
  • Not Just Lost Revenue: The damage extends far beyond the immediate transaction. Chargeback fraud results in added fees, wasted resources spent fighting disputes, and can even lead to higher processing fees from banks.
  • The Main Culprits: Our report revealed the primary reasons behind this surge in chargeback fraud:
    • Confusion over policies: Unclear return or shipping policies can result in legitimate customers mistakenly filing chargebacks.
    • “Friendly Fraud”: Unfortunately, some consumers intentionally abuse the chargeback system to obtain goods or services for free.
  • Industries Under Attack: Certain business sectors are more heavily targeted by chargeback fraud. These include travel, digital goods (e.g., software, subscriptions), and high-end retail.

Nigeria’s reliance on centralized payment switches has exacerbated the chargeback problem. Lack of direct communication between banks and merchants, limited transaction visibility, and complex dispute resolution processes hinder effective chargeback handling. In 2022, we decided to do the impossible, we decided to build a blockchain-powered payment infrastructure product to solve today’s payment problems, and power its inevitable future. We secured a switching and payments processing license from the Central Bank of Nigeria in 2022, making our product Africa’s first regulated layer-1 blockchain network for payments. We are resolute in our belief that blockchain technology provides the answer and we’re already seeing this manifest with results from our ATM use-case which was the first product we rolled out for some of Africa’s biggest financial service providers.

As Africa’s first layer-1 blockchain network for payments, we established an immutable and transparent transaction ledger accessible in real-time. Our regulated and decentralized, peer-to-peer architecture eliminates centralized vulnerabilities ensuring transaction integrity – a robust foundation to mitigate fraudulent chargebacks.

We achieve this through:

  1. Irrefutable transaction records that validate chargeback legitimacy, providing an unassailable source of truth.
  2. Enhanced transparency, giving all parties – synchronized access to real-time transaction data, reducing disputes.
  3. Automated smart contracts to streamline verification and dispute resolution without manual intervention.
  4. Robust security through decentralization and consensus mechanisms, preventing transaction tampering.

Our innovative “regulated blockchain” model, built on the highly scalable Hyperledger Fabric framework, is engineered for the demands of Nigeria’s financial sector. Each participating bank and fintech node has unmatched transaction capacity, collectively multiplying the system’s throughput as more institutions join our network.

With our recent $8.5 million seed funding from renowned investors like Flourish Ventures, TLcom Capital, Digital Currency Group, VKAV, Alter Global, and Endeavor Catalyst, we are well-capitalized and positioned as the pioneering force driving blockchain’s technological leap in Africa’s payments landscape. The backing of these prestigious investors is a resounding endorsement of our mission to connect every monetary store of value using blockchain. As we forge ahead, solving foundational challenges like chargeback fraud, we will propel Africa’s transition to a new era of secure, transparent and efficient digital payments.

Leave a Reply