Blockchain for Banking Retail

Amex pilots blockchain rewards

American Express Gold credit card

Yesterday American Express announced a blockchain rewards pilot with the online retailer Boxed. Most credit card rewards programs target particular merchants. By leveraging blockchain, rewards can target specific products. While not mentioned in the announcement, it’s easy to see the potential benefits of speedy, broad-reach programs for product companies like Nestle and Unilever.

The initial pilot focuses on a small number of products with Boxed. However, the card company expects to expand this to more products and many retailers quickly. Enabling faster onboarding of new merchants into their rewards program is another benefit that Amex anticipates.

In addition to targeting specific products, the platform enables targeting promotions on a time basis, whether that’s by the time of day or day of the week. Moreover, even targeting specific customers.

Merchants can use it to clear stock. For now, Amex is putting merchants in the driving seat. However, it’s easy to anticipate the FMCG product companies like Nestle, Procter & Gamble, or Unilever working with Amex to roll out promotions across all Amex’s rewards merchants.

If the system has sufficient scale, this is a much quicker way for the product companies to launch promotions. It’s digital and requires far less lead time compared to distributing pop-up promotions in numerous stores.

The Amex system is based on Hyperledger which uses the concept of private channels. This means that each merchant communicates with Amex across one of these channels. One merchant has no idea about other merchants. According to Amex, the anonymized transaction information goes across the channel to Amex.

For this application, the anonymized aspect is interesting. On the one hand, Amex is taking the payment. They only need to know the number of rewards. However, at the same time, there will need to be some audit trail.

Other blockchain applications

Last year Amex piloted a blockchain system for corporate customers. This enables payments from the United States to UK customers that bank with Santander. The system leverages Ripple for payments, and Santander recently rolled out a similar consumer application across Europe for forex payments.

This year three Asian airlines announced blockchain based rewards programs: Singapore Airlines, Cathay Pacific, and Air Asia. Low-cost airline Air Asia plans to launch an ICO to make their rewards program based on cryptocurrency. The CEO wants to reduce some of the foreign exchange costs of servicing customers onboard.