Leveraging Blockchain for Product Authentication and Anti-Counterfeiting

In an interaction with Industry Outlook, Manoj Kochar, President, Authentication Solution Providers’ Association (ASPA) shares his insights on how industries can address the problem of counterfeiting by adopting new anti-counterfeiting technologies, and overcome the key technological challenges in implementing blockchain for product authentication, and more. With a rich background in both holography and authentication, Manoj is currently the President of the Authentication Solution Providers Association (ASPA), a New Delhi based association of authentication solution providers, which is a widely respected and perhaps the most active industry association in the global authentication industry.

What are the key technological challenges in implementing blockchain for product authentication, and how can they be addressed?   

The digital verification process hinges on QR codes that consumers scan to obtain verified information. Blockchain functions as the backend of this digital verification process, while the QR code serves as the frontend. When consumers scan the QR code, they access the information intended by the brand. However, on the backend, technologies like blockchain are used to store data on multiple ledgers, ensuring that the data cannot be hacked. Thus, QR code-based digital technology is poised to remain essential. However, ensuring the backend's robustness is crucial for those opting for blockchain. If the backend can be hacked, there is no point in having a sophisticated frontend solution.

Addressing the technological challenges involves ensuring that the blockchain infrastructure is secure, scalable, and integrated effectively with the QR code system. This requires robust encryption methods, regular security audits, and a distributed network of ledgers that can prevent unauthorized access and data breaches.

The combination of digital and physical solutions, often referred to as "phygital," integrates a digital verification tool, such as a QR code backed by blockchain technology, with a physical security feature like a hologram or specialty inks. Consumers examine the packaging or label for these security features and then use a smartphone to scan the QR code for more information. This dual-layer approach enhances security and trust.

Therefore, implementing blockchain for product authentication involves ensuring the backend is resilient against hacking attempts. This involves using advanced encryption, distributed ledger technology, and integrating physical security features with digital verification tools. By addressing these challenges, QR codes and blockchain can significantly shape the future of product authentication, ensuring data integrity and consumer trust.

What strategies can increase consumer trust and awareness of digital authentication tools to combat counterfeiting?

To increase consumer trust and awareness of digital authentication tools to combat counterfeiting, we must leverage the widespread use of smartphones across all sections of society. Consumers are now connected to the internet and use smartphones for various purposes, including downloading apps and shopping online. Smartphones are becoming integral to our lives, and product verification through smartphones is becoming smarter every day. As a result, smartphones can capture images of unique secure elements or design elements that differentiate an original print from a photocopy. These are known as non-clonable images, a trend that will enhance digital verification and aid in the verification process. By educating consumers about these capabilities and encouraging their use, we can significantly increase trust and awareness in digital authentication tools.

How can international cooperation and harmonization of regulations be achieved to combat cross-border counterfeiting effectively?

International cooperation and harmonization of regulations to combat cross-border counterfeiting can be effectively achieved through measures like the recent U.S. government mandate requiring all medicines entering the country to carry a QR code. Once the code is scanned, regulators can access the antecedents of that particular medicine and any other information meant to be available at this level. This measure, will help regulators and governments worldwide trace the origin of materials right up to its source. With tight control, it will be easier to prevent the proliferation of counterfeit or illicit goods through the channel. The Indian government is also exploring this option. By adopting similar standards and technologies globally, countries can work together to create a unified front against counterfeiting, ensuring seamless cooperation and more effective regulation across borders.

How can industries mitigate the challenge of counterfeiters quickly adapting to new anti-counterfeiting technologies?

Counterfeiting is often perceived as a victimless crime since there is no visible victim of a counterfeit incident. However, it has become a pervasive part of our daily lives. In 2022, ASPA and CRISIL conducted a study and reported the state of counterfeiting in India. Some figures from the study are startling: in the apparel industry, counterfeiting was at 31%; in FMCG, 28%; in automotive, 25%; in pharmaceuticals, 20%; in consumer durables, 17%; and in agrochemicals, about 16%. These segments are witnessing significant counterfeiting. One shocking discovery is that almost 89% of consumers acknowledge the availability of fake products in the market, and 30% purchase them willingly.

One major reason why consumers still purchase these products is their availability and price. This issue of counterfeit goods has become deeply embedded, affecting many consumers. Therefore, brands should raise awareness of this issue. A few years ago, a popular campaign known as "Jago Grahak Jago" educated consumers on their rights. This was a very successful campaign, and similar initiatives should be created by the government, regulators, or even brands. Such campaigns should focus on raising awareness about counterfeit products available in the market. Counterfeit products cause losses to the government, and brands lose revenue. Additionally, consumers receive substandard products, diminishing the perceived value and trust in the brand. Legitimate jobs are lost due to counterfeiting.

To address this issue, we must resort to awareness and leverage technology, as technology is becoming smarter. Our association, ASPA, has almost 80 members now, offering various technologies, including holograms, QR code-based solutions, security printing, and design. ASPA provides a platform for collaboration and innovation to combat counterfeiting. Thus, counterfeiting must be addressed through awareness, technology, and consumer education, which is a significant focus area in my view. Industries can mitigate the challenge of counterfeiters quickly adapting to new anti-counterfeiting technologies by continuously innovating and staying one step ahead through these integrated approaches.

I would also encourage brands to explore ISO:22383:2020 which gives guidelines for performance criteria and evaluation methodology for authentication solutions. This is a great reference tool that is not quite utilised enough to fight the scourge of counterfeit.