Can Blockchain Boost Credit Card Rewards?
Blockchain is one of the most frequently used buzz words in today's business environment. The technology is based on a system that uses a digital ledger to record transactions. Rather than storing information about those transactions, the exchanges are stored in a secure and verifiable manner inside cryptographic "blocks." Those blocks are connected in, you guessed it, a chain. The term has earned plenty of recognition for powering Bitcoin and other cryptocurrencies, but the technology itself is doing much more than reinventing the way we look at currency.
Walmart is using blockchain technology to enhance its food safety efforts, and shipping giant Maersk is using it to make major changes to global shipping. Now, the decentralized approach to recording transactions and storing data is changing something near and dear to the hearts of TPG readers: credit card rewards.
Earlier this year, American Express partnered with Boxed to conduct a blockchain-enabled pilot program that allowed Amex customers to earn 5x Membership Rewards points on certain household products from companies like Dove, Cheerios, and Planters. (If you're not familiar with Boxed, the boxes are quite big. They sell wholesale packages, and you can often find some great deals.) While details on the program were scarce, the primary benefit from this blockchain implementation seemed to be a higher level of personalization. Bonus earnings offers were tailored to individual purchasing patterns. "We were able to prove the efficacy the blockchain capability, and how merchants can leverage their own data and insights to provide better, more personalized offers to their customer base," Chris Cracchiolo, Vice President of Global Membership Rewards, told me via email.
Cracchiolo said that Amex has plans to expand blockchain to more merchants in the fall, and he called the move a direct response to card members' requests for more ways to earn Membership Rewards points.
"This new technology will open up new opportunities and channels for card members to earn Membership Rewards points with merchants we know they already love and are shopping at," Cracchiolo said. "With blockchain, our Card Members will receive offers with a higher level of customization, based on their needs and how they’ve engaged with merchants in the past."
In addition to an increased level of personalization, it sounds like members can expect an increased number of merchants and offers, too. While adding and on-boarding new merchants and new offers typically takes months, Cracchiolo said that blockchain can reduce that set-up time to just a few weeks. Once they're up and running, merchants will have more power over what you see and when. "Merchants will be able to control the types of offers they want to market through their proprietary channels as both live in their own ecosystems, and they are not limited to American Express channels or timelines," Cracchiolo said. "They can create custom Membership Rewards earning structure and assign bonus to items at product or SKU level."
Only the Beginning for Blockchain
Cracchiolo couldn't share specifics of future plans but did allude to conversations with other merchant partners about leveraging blockchain. While the Amex pilot marked the first blockchain-enabled loyalty program experiment in the US, there will be many more on the horizon, and they have the potential to eliminate some of the frustrations and hassles of calculating the valuations of points and miles and waiting for transfers between programs to clear. Consider finding an incredible offer to book a Qantas flight, only to wait two days for your Citi ThankYou Points to transfer, or hoping to book a last-minute stay at a Ritz-Carlton property before realizing that it will take two days for your Chase Ultimate Rewards points to appear in your Marriott Rewards account.
"Blockchain can enable a transaction to be recorded and accessed by multiple involved parties in near real time," Steve Fromhart and Lincy Therattil, research managers at Deloitte Financial Services, wrote in "Making Blockchain Real for Customer Loyalty Programs", "increasing the chance that a loyalty rewards program provider can cut through coordination inertia to credit points faster."
That accelerated transfer speed may still be miles away, but I'll be keeping a close eye on the next year of blockchain activity. Many businesses are investing in blockchain and filing patents for new blockchain applications as they recognize the value of the technology. Let's hope that value trickles down to credit card users soon, too.