How DeFi can improve the e-commerce sector

Decentralized finance and shopping seem an unusual combination at first. How can liquidity pools help you save money at checkout? But scratch a little deeper and some compelling use cases for DeFi emerge. With the retail industry going through one of the toughest times seen in a generation, here are the main problems facing ecommerce right now … and how DeFi could solve them.

A match made in heaven?

Amazon, eBay and Shopify have transformed the way we shop for everyday items. Now anyone can become a trader and once exotic products can be delivered to their doorstep within hours. But the rise of these ecommerce platforms has created some new problems and exacerbated the old ones.

Small businesses selling their products through these online shopping giants can often end up paying 15% to 20% commissions, denting slim profit margins. Inevitably, some of these costs end up being passed on to customers, which means they pay far more for items than they could in a decentralized environment.

Some blockchain platforms are already addressing this problem and attitudes are starting to change. PayPal has now started rolling out its cryptocurrency service, which means millions of merchants will soon be able to accept digital assets as a payment method. Deutsche Bank also warned that cash days are numbered and criticized the likes of Visa and Mastercard in a recent report. “They have significant pricing power, which is not great news for retailers or consumers,” the German financial giant wrote.

DeFi takes shape when it comes to cutting costs and already removes the middlemen for those looking to move their cryptocurrencies from A to B. But there are other benefits that can be realized as well, eliminating some of the pain points that centralization has. can’t solve.

Define loyalty

Loyalty programs are at the top of this list. As Deloitte recently noted, the proven approach of ensuring shoppers repeat habits requires a drastic rethink, warning that traditional schemes are “tired” and lack customization. The report says customers now expect rewards tailored to their personal tastes, and younger shoppers want their favorite brands to use technology that delivers a frictionless experience.

“Businesses must adapt to the digital age by adopting agile and flexible solutions that allow them to realign their customer experience program with evolving customer expectations and needs,” added Deloitte.

One of the biggest flaws in loyalty programs is how they can be isolated. Many resellers have their own systems, leaving shoppers with little choice but to register for each one individually. This can be incredibly inefficient, not least because time-hungry consumers are likely to forgo discounts if it means filling out another application form.

But DeFi could help remove this friction, creating a world where customers only need one address to receive reward points from the places they shop. Smart contracts could ensure that these loyalty programs also transcend borders, meaning a British tourist making a purchase at a Costco in the US can earn points just like they would at home. All of this can help make loyalty programs clearer and more transparent. Encouraging resellers to work together can also make these schemes more financially sustainable, and this is important given the way Deloitte describes existing ventures as “risky and expensive”. Just as DeFi can help the world’s 1.7 billion non-bank consumers access financial services, it can also open much-needed doors to the world of e-commerce.

Giving retail a DeFi makeover goes way beyond discounted sneakers. If done right, the protocols could also offer merchants a better deal, allowing them to withstand tough economies (such as those caused by the coronavirus pandemic).

Every day, these small businesses face a dilemma. Frictionless payments make it easier for shoppers to make impulse purchases, but can increase levels of fraud and in many cases merchants are expected to pay the bill in the event of chargebacks. According to the Nilson report, $ 32 billion was lost to card fraud in 2019, and it’s a problem that is set to persist stubbornly through 2020.

Smart contracts, smarter purchases

Uquid aims to establish a bridge between DeFi and e-commerce through Defito, a new ecosystem featuring concepts never seen before in the retail sector.

Shopping mining means that new tokens or coins are generated every time a customer purchases an item, and smart contracts are used to ensure these resources can be allocated to other purchases in the future. The process is automatic and straightforward, and it provides much-needed improvements that eliminate some of the glitches associated with loyalty programs right now.

There are also features inspired by automated market makers, the smart contracts that create token liquidity pools. In this ecosystem, automated shopping brings together pools of products created by many suppliers. Customers can then connect directly to this pool and track the amount of products available and their price, allowing them to get a better deal on the items they want to buy.

Over time, these smart contracts will hopefully allow merchants and buyers to connect without intermediaries, reducing costs for all. Uquid believes that DeFi can help ecommerce businesses grow rapidly and reach a broader cross section of customers around the world. The company is also confident that its approach could transform global trade.

One of the first places people can shop using this ecosystem is Uquid’s digital store, which is home to over 40,000 digital products including video games, gift cards, subscriptions and mobile top-ups. The platform uses a Lightning Network node which helps speed up transactions, all making them cheaper. New products are added on a daily basis, and the e-commerce site plans to add physical items in the near future.

Retail is on the decline and retailers are becoming innovative as they compete for attention in a crowded market. Fresh from shaking up the financial sector, DeFi may arrive at a shopping cart near you.