Fraud Detection for Online Business: How Blockchain Technology Works

The Internet has become such a really great part of our lives, and it has changed the way we lead our lives. The whole cyber world has changed drastically and all major operations have become reliant on online technologies. People all over the globe can easily exchange information, conduct business and connect with users all over the world. To give you an example of how fast the online world is growing, Amazon has more than 285 million active users by 2015, in the upcoming year that number is sure to triple. With the abundance of availability of information on the web, the internet is a huge convenience to the users. Also, internet-based online systems are widely used to assist decision-making processes of multiple kinds.

Solutions with built-in artificial intelligence can gather information, process problems, and provide solutions to different problems in different industries. One of the primary examples is online bank account verification. Banks, financial institutions, and other organizations can use DIRO’s online bank account verification tool to make sure to tackle problems and provide needed solutions.

Based on the information provided and algorithms, machine learning and AI systems can be used to improve the functions in the finance, e-commerce, and healthcare industry. Regardless of the problem, these intelligent systems can offer answers by using old data. Unlike the real world, information online is input using a web interface. As technology is improving, users can plant fake information anywhere, anytime without face-to-face interaction. This ease of providing fake information means that it has become harder to detect fraud and fake documents from real ones. Information fraud can reduce the effectiveness of machine learning programs and can result in a lot of financial loss for organizations.

A lot of experts examine fraud to determine the methods that can be used to reduce fraud. Since the built-in algorithms in AI and machine learning programs are built differently, fraudsters will use different methods to provide fake information for different kinds of frauds. Some of the major reasons behind information fraud are money laundering, identity theft, or seeking inappropriate profits. Not every detection algorithm has the capability of finding anomalies in information and reduces the risk of fraud.

In an era where a lot of operations are completed using multiple computers, the use of blockchain technology came into existence with the rise of Bitcoin. Blockchain technology can be used almost everywhere to make sure the user’s privacy is kept secure by businesses. Blockchain is a public registry that verifies every single transaction and stores it in groups. Below we will analyze the effectiveness of blockchain and how it can be used for fraud detection. Any information can be considered fake information as long as it’s not verified as a real piece of information.

Breaking Down Blockchain Technology

Blockchain was built to ensure the safety of Bitcoin transactions. It operates on a peer-to-peer electronic cash system that allows payment to be sent from one entity to another one without the need of any financial institution. As a result, it helps in building trust without the intermediation of banks, governments, and technology companies.

The whole mechanism of blockchain technology can be explained with its first application. Bitcoin is a cryptocurrency and it is widely different from traditional currency issued by governments. Bitcoin is a public ledger that works like an online bank account that every user can access to receive and transfer money. This type of bank is different from a traditional bank, where all information is controlled by a central authority.

While the information is open to any code, the security of information is guaranteed by using multiple digital signatures. Once a Bitcoin transaction is completed, all the nodes in the network will be informed by the latest transaction. Once a transaction is included in a block, it becomes stored forever and becomes certified.

Basically, the blockchain is a ledger technology, where every single transaction is linked to the previous transaction in the chain. This arrangement only works if all the participants agree to add or remove any information from the Blockchain. A large amount of computations, all of which use hash functions, are required from every node to verify and accept new records. So if a transaction is added to the blockchain network, it usually doesn’t go back. Any information updated on the blockchain is secure, permanent, can’t be tampered with, and come with irreversible records.

Cryptocurrency isn’t the only department where blockchain technology can be applied. As all the information is publicly available and it is permanent, it can be worked by types of services. One of the best uses of blockchain is to secure data and financial information in banks and FinTechs. Adding blockchain technology will significantly improve the effectiveness and efficiency of almost all kinds of factors.

How DIRO Uses Blockchain For Document Verification?

DIRO’s original document verification technology verifies original documents online right from the original source. The technology provides proof of information which can be then shared as original documents or upload copies online. DIRO’s original document verification technology then stores this original document fingerprint on the blockchain. Once the information is stored on the blockchain, it becomes provable, reportable, and auditable. Using blockchain technology, DIRO builds an unchangeable proof of trust in original documents.

DIRO’s online document verification technology can verify bank statements, proof of address, utility bills, and student records. Banks, financial institutions, and FinTechs can use document verification technology to reduce the cost of manual document verification and reduce the risk of fraud.

Adam Mendas