End-to-end Encryption in E-commerce

End-to-end Encryption in Ecommerce

Online marketplaces may offer their users end-to-end encryption options to improve network effects.

Information Security: Access, Ease-of-use, and Consensus

Throughout time, people have invented new ways to keep information secure. In our common quest, information security revolves around three concepts: access, ease-of-use, and consensus.

A silver coin relies on the scarcity of the metal to deliver consensus and the ease-of-use of carrying one to deliver access, thus, offering people an easy medium to transmit the consensus of currency.

A local country clerk strictly administers her access to property records with consensus from a title company, hence, offering people an ability to secure rights to land ownership.

The United States Constitution offers all citizens equal protection of the law through consensus of a single and a unique document, with limited access by Congress to modify, remove, and add Amendments.

These are just some of the major experiences made possible with the implementation of highly secure and reliable information.

The challenge to deliver secure access and consensus to users has always been the same: cost, reliability, and scalability. On the Internet, today, almost anyone can post almost anything. The Internet solves the problem of scalability and access, yet such easily published information may lack reliability.

While people may be OK to use basic Internet resources to receive free advice on how to bake an apple pie, e-commerce requires Internet companies to deliver consensus in a highly reliable format. Innovative e-commerce solutions can solve this dilemma with the use of encryption.

One of the earliest examples that resolve the issue of securing the integrity of information comes from the commercial dealings by the Babylonians during King Hammurabi’s dynasty, circa 1800 BC. During this time, a massive trade had evolved in the region, and with it, the need to record and transmit reliable commercial information. Merchants began to utilize innovative methods to prevent fraud in dealings with one another. Good trade practices, such as transactions with properly executed receipts began to take shape.

One of the biggest challenges for merchants at that time was to record contracts cost-effectively and reliably. To solve this, Babylonians invented an ingenious solution to record a contract in duplicate so that it cannot be altered. A clay tablet was used to record the original terms of the contract and placed inside a clay “envelope” with the same terms written once more on the outside.

If any party attempted to change the terms written on the outside, the validity of the original terms could be easily verified by simply breaking the “envelope” and reading the text on the inside. This was the original version of a permissioned blockchain agreement, a ledger where records cannot be altered without breaking the original chain of events.

The clay “envelope” method offered merchants cost-effective security by limiting access to the original information while allowing the actual terms to be easily read. By mutually limiting physical access to the inside tablet, both parties gained an added element of trust when dealing with one another.

Modern Uses of Encryption in E-commerce

In 2020, encryption technology opens new possibilities in e-commerce and it works largely via the same mechanism as Babylonian clay “envelope” tablets – the limited access.

All encryption technology, one way or another, attempts to limit access to the transmitted information with the least possible expense to guard the consensus. One of the most famous uses of encryption today is the execution of a mining algorithm required to maintain a public ledger called Bitcoin.

The added work required to solve the encryption ensures that the public ledger is not easily modified at random – only the miner that solves the decryption task first receives Bitcoin as payment for the work needed to modify public ledger’s new block. The miner, in this case, only gets paid if the ledger is maintained, and the ledger is maintained as long as mining remains profitable.

The price to maintain this limited access is costly, both as financial and energy use, but the guarded consensus makes it easier for people to trust the Bitcoin network enough to transfer real money in and out of it, subject to arbitrage and, often, for money laundering purposes.

Bitcoin itself has no value, instead, the consensus of the ledger is lined with an added expense burden as an extreme measure to deliver trust. The public nature of the Bitcoin blockchain ledger itself protects the integrity of whatever is being transacted since no one miner owns the database. All data on public Bitcoin ledger can be read by anyone, but modified only by a single miner with consensus from other miners (in competition, or in collusion, the prize always goes to the first one to offer a decrypted solution.)

Encryption, however, has much more powerful e-commerce applications that far outweigh the use in mining activities required to secure proof-of-work cryptocurrencies. The best application of encryption technology in e-commerce does not operate on the principle of an added expense, but rather allows users to take advantage of an added security that is nearly free to use.

Some of the most risk-averse e-commerce on the Internet can be made nearly frictionless with the use of end-to-end encryption. While offering to implement end-to-end encryption is nearly free, such an option requires an added effort from the participants: consumers and vendors. The question is how do we get it?

PayPal was one of the first e-commerce companies that realized that payments between users are much easier transmitted online “blindly” without users sharing their payment information directly with one another. PayPal solved this problem by offering itself as a payment facilitator and breaking each transaction into two separate transactions – payment is made to PayPal by a consumer, and, subsequently, payment is transferred from PayPal to a vendor.

Both parties have an understanding that PayPal is a trustworthy intermediary that will abide by the terms of the deal. PayPal offers the added value of consensus in exchange for limiting access to the user’s credit card information by unknown parties. End-to-end encryption is not necessary for this process, only because both parties of the transaction trust PayPal with their information and individual user interactions with PayPal are encrypted with HTTPS protocol.

However, a hacker, for example, can easily obtain the user’s PayPal account information, steal the funds – a breach of trust that PayPal must pay for. On the Internet, for this reason, the best security is an ability to transmit information between users without ever knowing what it is. End-to-end encryption is the only technology that currently offers such options.

WhatsApp® was one of the first products to implement end-to-end encryption as a true mechanism of security. Facebook, the parent company of WhatsApp®, claims that the encryption allows users to send data securely between one another, and this is also true. From a financial perspective, the end-to-end encryption allows Facebook to transmit massive amounts of messages between users without being subjected to the expense of regulatory requests for information from every government agency imaginable.

Facebook can’t read WhatsApp® messages, it can’t store them, and therefore, it has nothing to report to the government. Incidentally, the government doesn’t like that. End-to-end encryption saves money for Facebook and allows it to run WhatApp® as a free application. If Facebook data servers are ever breached, hackers simply cannot find any meaningful WhatApp® messaging content, thus saving Facebook from a major legal liability. E-commerce can learn from this.

End-to-end Encryption in High-value Digital Advertising

Without a doubt, AdWords® is the most common AdTech pay-per-click product in the world today, and the most successful advertising product in all of present history. PPC-based ads, however, are limited when the value of the experience outgrows a few dollars spent on each click. In cases where marketplaces must operate with high-value transactions, PPC-based ads begin to fail.

The relatively small price of a PPC ad can be bought to turn paid ads into exigent fees that damage consumer experiences and destroy free-market forces. Consumers, eventually, find this out and begin to lose trust in the service that advertises these products. Google attempts to counter this problem by limiting ads for some exceptionally evil financial products and services, such as cryptocurrencies and high APR personal loans but the company has yet to set any rules for present abuses in high-value services industries, such as real estate.

As of 2020, Google is unable, or unwilling, to handle the complexity of residential real estate transactions to determine which services harm consumers, and which services help us. For example, Google actively displays ads from Referral Fee Networks that operate in violation of the Sherman Act and RESPA, costing consumers $15 Billion in junk fees each year generated with the use of blanket referral fee agreements.

At HomeOpenly, we utilize an alternative method of advertising suitable for high-value transactions called Direct Leads™ that further takes advantage of end-to-end encryption technology to help to protect the integrity of the user experience for all parties.

This new method to deliver ads allows consumers to transmit highly sensitive information, such as a mortgage and refinance applications, directly to vendors without the transmitting party, HomeOpenly, having access to it. HomeOpenly is the first e-commerce marketplace to experiment with this technology in the online real estate industry.

For obvious reasons, such ultra-secure e-commerce transmissions can greatly decrease friction in any marketplace. Consumers gain added trust in having their information transmitted to vendors securely, while vendors gain absolute knowledge that the information has not been modified (depending on use, however, additional steps may have to be taken further to confirm the utilitarian legitimacy of the transmitted information.) Any information, transmitted in such fashion, becomes ultra-secure and highly reliable as a matter of accuracy. Direct Leads™ offers advertisers a much better trust factor than PPC-based ads because the consumer actively chooses to engage with the vendor.

End-to-end Encryption in Digital Mortgage

There are two hard parts to lending: (1) getting prospects in the door, and (2) getting together the documentation to support the deal. A mortgage loan originator (MLO) is an entity that, for a compensation, takes a residential mortgage loan application and works to negotiate terms of a loan on behalf of the consumer.

Retail mortgage loan originators typically take a point to point and a half on closing, sometimes paid by the lender. A point is one percent of the total loan term originated. For example, a point for a $500,000 mortgage is a $5,000 fee paid to the mortgage loan originator for doing the work. The main variables between lenders range from the size of the loan (FHA, VA, and Jumbo – not all vendors have all of them), interest rate (fixed or variable), loan term, and the lender points paid to originate the mortgage.

Also, each lender underwriter has slightly different criteria, where some borrowers can pass certain underwriters and others can’t. The underwriter gets the last word, always, and the mortgage loan originator must submit a complete set of documentation to each.

Once the lender pre-approves the terms, a consumer can begin to exercise their pre-approval status (pre-approval letters typically expire within 60-90 days.) After the negotiation and disclosures are done, the real work begins; collecting all the documentation to prove that the borrower has funds to cover closing costs (and if a purchase, the down payment.)

The mortgage originator helps the borrower prove that money is not borrowed and does not magically appear in cash which would indicate hidden borrowing. The borrower must prove their creditworthiness: copies of paychecks, bank statements, complete credit report, etc. Some percentage of borrowers cannot pass the approval process, and all the work by loan originator would be for nothing.

A few late payments on a bill 3 years ago might be enough to kill a deal, where the borrower might not even remember, but Equifax remembers, although not always correctly.

To be competitive, a mortgage loan originator must have strong relationships with several of the lenders in the marketplace, not just one or two. On any given day any one of them will be hungry and have the best rates. Banks, credit unions, and savings and loans are fairly consistent, but will seldom offer the best deals.

This existing process is bulky and is difficult to automate for a small mortgage loan originator business. The repetitive nature and consistent documentation, however, is the perfect opportunity for automation by a nationwide technology company.

The key to all lending is trust, including the trust that the process itself is secure. Any technology company that collects data can also lose all of it in an instance, exposing millions of records with detailed borrower’s application information. For a massive marketplace, such risk is unacceptable, or at the very least, avoidance of such risk offers an opportunity for savings.

LendOpenly™, RefiOpenly™, and InsureOpenly™ are the first examples of ultra-secure automated AdTech products that can disrupt an ancient method of applying for a mortgage, home insurance, and home refinancing.

End-to-end encryption allows HomeOpenly to forgo the added costs associated with the transmission of consumers’ information required from a typical mortgage broker, simply because we can remain “blind” to certain consumers’ private information during the transmission. HomeOpenly transmits random digits that only become names and social security numbers in the hands of intended lenders.

Direct Leads™ advertising utilizes the same technology used by WhatApp® and similar ultra-secure applications that negate user friction to share “too much personal information” via a third-party. HomeOpenly, in this case, acts as a third-party marketplace that only transmits random digits, and the true information remains in the hands of the consumer and the lender, with the use of private keys, as intended.

With the use of an end-to-end encrypted platform such as LendOpenly™ consumers can organize and distribute the required documentation securely to dozens of lenders. This is a much easier, less expensive, and a more transparent way to apply for a mortgage anywhere in the United States.

Most importantly, this approach is highly scalable. With the wide adoption of the Internet, consumers who now trust their local mortgage broker can further extend their trust to a much more efficient nationwide marketplace with help from end-to-end encryption technology.

The use of end-to-end encryption takes some extra effort for consumers and lenders, including the implementation of an API and installation of a client application on a user’s device. For any reasonable consumer to take an extra effort to install the required software application, said consumer must gain value, a real value. HomeOpenly delivers said value with consumer benefits of a nationwide Open Real Estate Marketplace.

A Direct Leads™ method of advertising offers users and lenders an undeniable advantage of savings as part of the added security. Savings offered by the open marketplace become a powerful force that negates the deterrent of having to install the required application and, as a result, consumers and lenders become highly motivated to exchange information with unbreakable security.

With the use of end-to-end encryption, LendOpenly™ allows consumers to receive a full landscape of unbiased quotes, without having to disclose their private information to us. End-to-end encryption helps HomeOpenly to act as an actual marketplace that is motivated to offer more options to consumers.

When genuine savings are present, the added effort required to install and use an end-to-end encryption software product becomes marginal because users are positively overwhelmed with the benefits of nationwide e-commerce.

HomeOpenly Direct Leads™ digital end-to-end encryption advertising products are currently in Beta.

Home lenders and insurers that offer value-added mortgage, refinance, and home insurance services to consumers in the United States (nationwide, statewide, multiple localities, and local markets) are encouraged to lock in the OTO (One Time Offer) pricing for the initial general availability web release:

LendOpenly™ - Home Mortgage Services Marketplace
RefiOpenly™ - Home Refinance Services Marketplace
InsureOpenly™ - Home Insurance Services Marketplace

End-to-end encryption offers an added value of privacy in high-value transactions - an organic catalyst that helps an online marketplace to reach a scalable adoption with positive network effects.

Related to: end-to-end encryption, e-commerce, marketplaces, digital mortgage, digital lending, AdTech, affordable housing, information technology, network effects, data, security, lending, refinance, mortgage, InsureTech, PropTech, FinTech, savings, cryptocurrency, Bitcoin, blockchain, private blockchain, security by design, privacy by design, open systems, home buying, digital lending, real estate, Big Tech, WhatsApp, Internet, PayPal, Facebook, Google

Your feedback is incredibly valuable. Please tell us what is important to you about your homeownership experience, what you look for in a trust-focused platform and how we can better serve you as our user.

Leave your comments

Thank you!

Your comments have been successfully received. Please allow 24 hours for your comments to become available.

Feel free to contact us if you need further assistance. At HomeOpenly we aim to make the opportunity of homeownership transparent, affordable and an open experience.

Last updated: April 18, 2020
First published: April 18, 2020