American Express' blockchain patent application isn't just about payments: It could also radically change how card-based merchant offers are made and allow them to become much more targeted.
The benefits of blockchain are the same for marketing as they are for payments, in that the distributed ledger technology provides immediate feedback on transactions. A blockchain can enable real-time management and visibility of rewards, coupons and redemptions to its customers and merchants.
Amex's blockchain efforts go beyond a single patent. Aimee Cardwell, vice president of technology at American Express, leads of team of 20 to 30 engineers and subject matter experts spearheading the company’s efforts on deployment of new blockchain technology.
“We look at deploying blockchain solutions for consumer, corporate and small business markets where it makes the most sense and delivers the most value," Cardwell said. "Once we determine a blockchain solution is appropriate, then we begin the process of exploring which technology should be used. I often tell people to think of if you have a reconciliation problem, it may be a blockchain opportunity.”
And the biggest opportunity is in rewards, according to Richard Crone, principal of Crone Consulting.
While cardholder preferences, AI and machine learning can all improve the targeting process, “this blockchain patent technology is the holy grail to the manufacturer since it shows in real-time of where their marketing dollars are being spent,” Crone said.
The problem in today’s card-based payments system is that your basic receipt doesn’t show what items were purchased. The only information available is aggregated data such as total amount paid, taxes due, date purchased, merchant location, etc. It lacks all product identifiers that could be tied to any manufacturer’s rebates, incentives or rewards.
This is why many cash-back offers remain paper-based, requiring shoppers to mail in a proof of purchase and wait four to six weeks for a check, Crone noted.
“Using this blockchain-based proof of payment, the receipt would be immediately received and the cash back could be given at point of sale which would be a massive game changer," he said. "It would eliminate the entire coupon redemption industry.”
Through the use of smart contracts, a merchant could create a promotion for cardholders and the technology manages the execution of the rewards redemption, Amex's Cardwell said. This patent application outlines a way to measure specific products purchased and seamlessly reconcile contract performance with little to no human intervention. It would also provide the proof of purchase needed for any manufacturer-sponsored program.
American Express has been very actively encouraging blockchain innovation, including “Blockchain 101” sessions Cardwell hosts to familiarize the company's staff with its capabilities.
Further, every new project doesn’t start at ground zero or the ideation phase. Cardwell's team has created a series of APIs and a testing environment that “allows teams to literally start at the third stage of project so they can get going much faster,” she said.
There's a clear sense of urgency in Amex's blockchain activities — it's far from the only issuer that cares about the technology. Bank of America has aggressively pursued its own blockchain patent strategy, for example.
“It’s the wild west at the moment and there’s no time waste,” said Tim Sloane, vice president of payments innovation at Mercator Advisory Group. “Some banks have filed for patents that achieve the same results yet deliver them in different ways. No one know if the applications will be approved. The key is to get projects in the field, pilots running and patents filed. If you wait, you may be too late.”
Another major element driving the urgency is that the technology has evolved dramatically in just the last 18 to 24 months, according to Sloane. “We have entirely new methods of deploying permissioned blockchains today and by determining who gets to operate within the chain, it enables the creation of new trust algorithms that can operate faster and more efficiently,” he said.