A blockchain startup seeks to duplicate Amazon's control of payment data
A Brooklyn startup predicts a mix of blockchain and AI can give retailers a referral and conversion model like Amazon and eBay, but the merchants will have to cede some data control.
Called Shopin, the company wants to take advantage of the trend toward consumer data ownership that’s a result of PSD2 and other open banking initiatives. Shopin’s accessing conversion data to allow retailers to use a decentralized model to glean more actionable payments and shopping data — and decide that doing so is better than keeping that data private.
Shopin says information about what people buy after shopping online is more valuable than what they say or share with friends afterward.
“We’re not as interested in social data. That’s easy to gather,” said Eran Eyal, the co-founder and CEO of Shopin. “We want the more elusive conversion data. No retailer wants to share that.”
The conversion rate — or the number of visitors to a retailer’s website who actually buy something on that site — for online shopping in the U.S. is about 3%, according to Statista. Eyal attributes that low rate to retailers not sharing that shopping and payment data with other retailers, arguing Amazon’s centralized engine creates that type of sharing with lucrative results. Amazon’s recommendation engine accounts for about 35% of its total revenue, or about 15% of all U.S. e-commerce revenue, according to Rejoiner.
Fintechs see a window for new models that decentralize data in an age of large data-sharing deals such as Google’s reported Mastercard alliance and the retail scale of companies like Amazon and eBay, which use their huge databases for cross-selling, recommendations and incentive marketing.
Listia, for example, has built Ink Protocol, which decentralized marketplaces by giving users a record of online sales that’s portable. Larger processors and bank technology companies such as FIS are also reimagining how AI can distribute and increase the power of purchase data for merchants.
“Retailers suffer from one major issue. They don’t have a purchase data ecosystem,” Eyal said. “They use disparate solutions. So we’re seeing the death of retail as we know it.”
Under the hood, Shopin uses a blockchain, artificial intelligence and deep learning to power the “Shopin Federation” or a network of retailers that participate and contribute to the blockchain. The technology is designed to provide insights into which brands and products are under-represented in a retailer’s catalog, information to brands on how their products are sold everywhere, and what else consumers are buying — and how they’re paying.
This system is designed to increase cart size, since it has information on channels, brands, products, payment types and incentives.
“All of the retailers hold little bits of data with a blockchain,” Eyal said, adding this provides information to support recommendations, loyalty, marketing and user experience without individual retailers knowing each other’s individual conversion rates. “It’s more like Amazon or Alibaba.”
Shopin’s current revenue model includes charging for use of its API to connect to the ecosystem, and it may eventually monetize advertising.
Distributed ledgers are seen as an alternative to Amazon and other giant e-commerce hubs because the decentralized model, which theoretically gives participants more control, could cut into Amazon's scale by peeling off the third-party sellers that account for more than two- thirds of Amazon's retail sales.
Blockchain can enable data to be stored anonymously in a centralized, multi-retailer database, according to Rick Olgesby, president of AZ Payments Group. The artificial intelligence engine is the analytics tool that would be used to decide what recommendations should be made to customers, he added.
“It would enable smaller retailers to compete with Amazon by leveraging a third-party recommendations engine, rather than build one of their own like Amazon has done,” Oglesby said. “It’s a logical use of blockchain and AI technologies, but it requires competitive data sharing, which may be a barrier for many retailers.”
Shopin, which says it accumulated about 3.5 billion payments and about 67,000 brands, views its model as contributing to the e-commerce ecosystem rather than disrupting it, according to Eyal, adding large e-commerce companies could participate in the distributed ledger.
“We’re not anti-Amazon. We think Amazon is a blueprint of what this type of market looks like,” Eyal said.
Shopin is piloting its technology, and is adding data from a few retailers to build its information and refine its AI engine. Shopin’s investors include Block One, and the company also had a token sale that generated about $42.5 million. It recently partnered with Qryptos, a subsidiary of Asian crypto exchange Quoine.
Part of Shopin’s product line is a crypto-based rewards system in which retailers can offer consumers the opportunity to receive a Shopin cryptocurrency that’s based on viewing ads, consumer content and making referrals. That cryptocurrency can be spent at the retailers or converted to traditional funds.