E-commerce and trading online have for a long time been extremely popular ways to buy and sell goods and services.
Purchasing things in the past might have been a complicated process involving lots of travel, but today it can be done with ease from the palm of your hand.
One increasingly popular way of trading online is the peer to peer method. This involves buying directly from another user, using platforms like eBay and Etsy. It allows people to sell their goods more easily and takes away many of the complicated steps involved in buying from a centralized retailer.
Mastercard has estimated a global market opportunity of $16 trillion for P2P. This has a few explanations — the increase in mobile apps for trading is a big factor, as is the growing number of platforms for P2P trading.
There are lots of other reasons why customers are turning to P2P trading over traditional e-commerce. It’s convenient, and there’s payment on demand. It also feels more personal — buyers can chat to sellers and ask questions directly about the product.
There’s also a lack of centralized markets for many things, like virtual items in video games for example. Often, the only way to acquire these goods is by trading directly with another person.
P2P trading is a global market. The internet allows people from opposite sides of the planet to communicate instantly, and goods can be mailed across international borders without too much trouble. Gone are the days when buyers were confined to their immediate geographical region when making purchases.
However, for all its advantages, the P2P e-commerce industry has some glaring problems.
Most of the problems with P2P trading are based around payment. One of the biggest issues is that of currency conversion. If a stamp collector in Canada wants to buy a rare stamp from a seller in Germany, this is a problem. The buyer will send across a payment in Canadian Dollars, and the seller will receive Euros.
If the payment is sent via bank transfer, the bank will deal with the conversion. Of course, they’re likely to charge a fee. In addition to that, the conversion rate applied might not be the most generous.
Both buyers and sellers will then have to take into account the fees that apply to the transaction. These can be high — average global remittance costs currently come in at 7.09%. Using other service providers can help, but even this doesn’t come free — PayPal charges 4.4% for international transactions plus a fixed fee.
So it’s not cheap. And to make matters worse, the time taken to process international transfers can be painfully long. The average time to process such a payment is three to five days, which can be frustrating if you’re in a hurry.
Perhaps the most pressing concern for those who engage in global P2P trading is the security aspect. There isn’t much in the way of regulations or protections for consumers in this market, and it’s generally down to the buyer’s (or seller’s) discretion to decide if a trade looks shifty. With the difficulty involved in solving disputes across international borders, victims of scams often have no choice but to accept their fate.
The global P2P trading market is huge and growing fast, but it just isn’t properly regulated. The methods that are in place to send money this way are outdated and poorly suited to a very new type of commerce.
So what’s the answer?
The blockchain solution
P2P is a decentralized way of trading. It takes place between individuals, without any real kind of third party involvement. Currently, however, it relies on centralized payment methods like banks and established service providers like Western Union.
What the market could really benefit from is a decentralized payment system, one which doesn’t rely on separate institutions with high fees and separated by borders.
That’s where blockchain comes in. The technology allows for decentralized networks which work on a global level. There’s no need to worry about high fees, as there’s no third party asking for money. What’s more, the cryptocurrency tokens used are the same across the world, so converting currency isn’t a problem here.
Because of its decentralized, global nature, blockchain systems can process transactions in seconds rather than days, and the transparency of the technology makes it hard to commit fraud. Smart contracts can be used to ensure no funds or goods are released until both sides hold up their agreement, reducing the likelihood of scams.
It’s highly promising. A recent report by McKinsey & Co predicted that blockchain could save the cross-border P2P market $3-5 billion.
There are many companies working on building these kinds of systems, such as Stellar. They use their own Stellar coin to make transactions across borders easy and painless, and avoid many of the pitfalls involved in buying things P2P from abroad.
Through Stellar, it’s possible to make payments in seconds, rather than days. The platform will also provide a secure framework for transactions and comply with regulations to give users peace of mind.
Blockchain offers a fresh and modern way to deal with a new kind of trading that traditional methods are poorly suited to. It can make global e-commerce easier, safer, and quicker for everyone involved.