July 19, 2017

An End to Credit Cards? How the Dark Web Is Pushing Fintech Towards Blockchain

By Daniel Matthews

Dark Web Pushing Fintech Towards Blockchain

As Jennifer Klosterman points out, “There are many strong reasons for reputable businesses to keep their noses clean and well out of the Dark Web.” Not the least of these reasons is the hive of criminal activity related to the credit card industry.

Businesses wheel-and-deal in a world awash with credit card data. Without credit cards, a company like Amazon wouldn’t exist, and neither would the banking industry as we know it. Online credit card payments are facilitating the rapid growth of e-commerce. The idea of a cashless society peeps its head out regularly.

Just the other day, Huff Post’s Rebekah Iliff sat down with Visa Inc’s Jack Forestell to talk cashless culture. Visa is offering 50 businesses $10,000 to go cashless. Visa has a big stake in seeing credit card payments prevail, and Forestell says they just want the “U.S. to catch up to the rest of the world with cashless payment technology.” Sweden’s consumers make 98 percent of payments without cash, 87 percent of Singaporeans prefer e-payments, and the UK’s online purchases numbered 182 million in February of 2017 alone. Furthermore, Forestell points out, “We’re going to see payment capabilities become embedded in virtually anything that is a connected device.” In other words, the notoriously insecure IoT will play a big role here.

Beneath all this lies the dark web, which has its own stake in seeing cashless payments proliferate.

Financial fraud sites make up about 12 percent of the dark web. On these sites, which are basically forums and marketplaces, thieves sell credit card information in bulk or by the individual card. A card with a high spending limit can go for $100, while the low-limit cards typically sell for $1. Bulk caches of card data might be worthless because the card company knows the data has been compromised. Individual cards are the ticket. A dark web hacker could steal your data easily if you make a purchase on unsecured wi-fi, or if security software isn’t updated and working properly.

Dark web denizens know credit cards aren’t safe, which is why they use Bitcoin and other cryptocurrencies on the blockchain to make untraceable transactions. More and more fintech startups are leveraging blockchain, in part because the dark web demonstrates that the peer-to-peer distributed ledger works. It can work for the good of the hacker, or it can work for the good of the fintech startup looking to disrupt the credit card industry and big banks.

Nowhere is this more apparent than in Asia. In Singapore, fintech startups are booming because the Monetary Authority of Singapore (MAS) is friendly to blockchain. This makes the government’s regulatory stance rather lax compared to America’s. Private investment company Marvelstone chose Singapore as a place to fund fintech startups because those startups can take advantage of the blockchain. Marvelstone’s managing partner believes that the future of blockchain in the finance industry starts with Asia.

Meanwhile, US and UK-based fintech companies are climbing on board. Among Forbes’ Fintech 50, San Francisco-based Chain works with heavyweights such as Citigroup, Capital One, and Fidelity to help them use the blockchain for their services. Visa is partnering with Chain on B2B Connect, which will allow financial institutions to use blockchain to facilitate global B2B payments. This shows that credit card companies and banks are taking on a “if you can’t beat ‘em, join ‘em” stance when it comes to blockchain.

In the UK, BABB is a fintech startup that “will allow everyone to be a bank.” BABB stands for Bank Account Based Blockchain. While the startup is not ditching fiat currency entirely, it is using Ethereum blockchain, AI, Machine Learning and biometrics to “create a customer-centric banking experience.” Customers will be able to open a BABB bank account with just a selfie and a voice print. They can fund their BABB account with Paypal, bank transfers, credit and debit cards, and peer-to-peer payments.

The dark web profits from the fact that the mainstream world of finance doesn’t use blockchain yet. But startups like Chain and BABB are making inroads that could put an end to the dark web’s party. Once mainstream finance is finally able to grasp the blockchain and wrest its secure payment capabilities out of the dark web’s hands, we could see an end to credit cards and stolen credit card data.

By Daniel Matthews

Daniel Matthews

Daniel Matthews is a freelance writer from Boise, ID. Daniel received his Bachelor's in English from Boise State University in 2006, and is currently working on a book about the 2008 financial crisis. Widely-published online, he specializes in research and analysis that sheds light on the intersection of tech, business, and current affairs. Daniel is an avid writer and technology enthusiast whose mission is to bring journalistic integrity and informed opinions to his audience in ways that make them think differently about the world. You can find him on Twitter and LinkedIn.
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