Disrupting Cross-Border Payments

Sending payments internationally can be a real pain-- the costs are high and the wait is long. At times, it feels like you’re throwing money down the drain.

• Average fees for international wires are $52 . Whether you’re sending payment to a person or company—or receiving payment—paying those fees each time you process a cross-border transaction or invoice can be prohibitively expensive. On top of fees, the exchange rate and transfer fees also add up.
• For remittances, a typical money transfer can cost up to 10% in fees and 7 days to process. In 2014, $592 Billion were remitted, and the industry is ripe for disruption.

“While digital transactions make up 5% of all remittance transactions in 2014, their costs are about 45% lower than physically transacted remittances.”

With the right tools, payments leveraging Bitcoin as the rails takes minutes or less and the transaction fees are much lower, which is important to both individuals and global businesses. But even then, fraud is a concern, so catching fraud quickly is critical.

Blinktrade saw these challenges and an opportunity to help communities around the world. In order to support these communities, they needed a way to quickly identify fraud, in particular double spending. Double spends are attempts to spend the same funds twice. Blinktrade also needed a way to quickly confirm remittances and other payments for customers who are sensitive to currency fluctuations. As a result, they teamed up with BlockCypher.

Blinktrade enables exchanges to provide instant B2B transactions and payments—including remittances—using the blockchain. To accomplish this ambitious goal, Blinktrade has a platform that provides a common front end (website) and backend infrastructure that exchanges use to connect with their customers. While Blinktrade focused on creating this platform and helping their exchange customers, they needed automated methods to identify fraud and rapidly confirm payment.

Immediate Payment Confirmation

To rapidly confirm payment, Blinktrade uses BlockCypher’s Confidence Factor. Within seconds of issuing a transaction, the Confidence Factor calculates the probability of whether a transaction is likely to be successfully confirmed or at risk to be double-spent. To provide that probability, the Confidence Factor web service takes into account all sorts of variables, including mining fees, transaction propagation, quality of outputs the transaction is trying to spend, etc.

If the transaction is likely to be confirmed and the customer has a spotless record, Blinktrade gives the customer an immediate credit on the exchange for the same amount as the transaction. As a result, customers can trade almost immediately, without having to wait 10 minutes or longer for the transaction to actually confirm on the network.

Fraud Identification

To identify when fraud or double spending is attempted, Blinktrade uses BlockCypher’s double spend notifications. If the double spend is not intentional, Blinktrade will not penalize the customer. If the double spend is intentional and the user fails to make their case in court, Blinktrade will confiscate the funds in the user’s account.

Prior to using BlockCypher, Blinktrade tried other API companies and wallets. The other solutions did not work: they could not detect double-spends, could not properly calculate fees, and instant confirmations were risky without mitigation tools. By using BlockCypher’s Transaction API, transactions have always been successful. Deposits were made on time. In addition, BlockCypher’s APIs are designed to give Blinktrade complete control of their private keys, so there’s no conflict on who controls funds.

With BlockCypher, Blinktrade and their users saw a number of advantages:

• Blinktrade users could post trades immediately.
• Blinktrade users have a better customer experience because they are not forced to use specific wallets. BlockCypher’s Confidence Factor is wallet agnostic.
• Blinktrade saved a developer resource dedicated to building integrations to other remittance companies who wanted instant confirmation. They reused BlockCypher’s Confidence Factor to fulfill that requirement.
• Blinktrade saved another dedicated resource whose job would be to manage these confirmations. Automating the handling of transaction confirmation through BlockCypher also made it easier for Blinktrade to acquire new partners and customers.

In the future, Blinktrade plans to enable companies to list and exchange their assets (e.g. stock). By using BlockCypher’s Asset API, they can buy and sell company equity, all backed by the Blockchain. By continuing to use BlockCypher’s Confidence Factor, they’ll be able to provide instant confirmations for any asset exchange. And Blinktrade customers will continue to get payments without paying out high fees or waiting weeks.

For a live discussion, join Cap Gemini and us for a webcast on September 21st. You can sign up here.