American Express has partnered with digital retailer, Boxed to integrate Hyperledger blockchain technology into its rewards program. Using the functionality of Hyperledger, the company will enable its merchants to create custom Membership Rewards programs for AmEx cardholders.
In this pilot program, members will be able to earn five times the normal amount of points when spending on a subset of products. Merchants will connect with AmEx using a private Hyperledger channel to transfer transactional data. Each transaction will be backed with a smart contract to automatically fulfill rewards program incentives.
Using Hyperledger, merchants will control their own offers, and will have the ability to customize their Membership Rewards structures, including bonuses on specific products. Though the program offers merchants greater versatility with their offers, American Express will still maintain brand control and will have the ability to regulate which products and brands are promoted. The legacy rewards program generally takes several months to onboard new merchants.
With the current system, this time can be cut down to several weeks. Although this is the first physical attempt at rewards fulfillment using blockchain technology by American Express, it is not their first time exploring this concept. American Express Travel Related Services filed a patent in 2017 defining how a rewards program would be stored on the blockchain. The patent was filed under the title, “Presenting a Personalized Value Added Offer During an Advanced Verification Process.” It detailed a framework for presenting a personal value added offer during verification, and cites the benefits of using blockchain technology for this purpose, including enhanced security. Under this patent, the company describes a method for providing rewards by collecting personalized customer data, including historic spending patterns.
Prior to the time the patent was filed in 2017, AmEx was already part of the Hyperledger consortium, led by the Linux Foundation. Although they appear to be among the first to market on this solution, AmEx was not the first to explore a blockchain-enabled loyalty program. The technology consulting firm, Capgemini has been working with Ascribe since 2016 to create a real-time rewards system. Other competitors include Accenture, PwC, KPMG and Deloitte.
AmEx appears to be adopting blockchain technology into all of its systems. Besides the rewards program, they have also filed a patent for faster payment processing. This was laid out as a system for managing a payment network using a blockchain-based ledger to complete transactions between a payer digital wallet and a payee address. The system would approve or decline the request, and adjust account balances upon approval.
In addition, AmEx is looking into ways that blockchain technology may be used to improve user identification security. As reported in TechRadar, the new system would protect users from fraud by helping merchants to securely process transactions, both internally and externally. AmEx is conservative about using the technology, and plans to abide by legal and regulatory requirements. Users would be able to control their own identity in an immutable record and chain of transaction. According to Tereasa Kastel, AmEx VP of Technology, “If you’re in this industry, you have to have a voracious appetite for all things identity…to be able to work in a world where there is constant change you…have to always ensure you can stay ahead of the curve.”
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