In December at the Hyperledger Global Forum in Basel, American Express was the most significant non-tech company to share details about its blockchain applications.
The cost of operating the rewards program is American Express’ single biggest expense at $8.7 billion in 2017. Given how important rewards are to the business, the company recently enhanced the program to make it more flexible. Hence the blockchain rewards project solves a real business need.
Today customers earn points based purely on the total transaction spend. The retailer might want to use rewards to target a brand or product, a particular day of the week, a customer profile or something else. But until now they haven’t been able to do that.
The appeal of rewards
And keeping the rewards program attractive is important. American Express has a premium brand with high-spending members who appreciate the rewards.
In 2017 American Express averaged $9,619 spend per card. And its basic proprietary cards have almost double the throughput at $18,519. Contrast that with Visa where cardholders spend $3,351 annually (Mastercard: $2,870), and after deducting cash withdrawals, the figure is just $2,443 (Source: Visa annual report).
As an integrated global payments company, American Express differs from Visa and Mastercard in that it operates as both the bank issuer and merchant acquirer, in addition to processing transactions. Visa and Mastercard don’t advance their own money, so instead their partner banks earn the interest.
But it hasn’t all been plain sailing. Earlier this year American Express exited its “coalition loyalty business” in the U.S. known as Plenti. The idea was to take rewards earned in one industry and spend it in another sector. So consumers could earn rewards on groceries and use them at Macy’s.
It was great for consumers, but according to PYMNTS.com, it wasn’t such a good deal for Macy’s and other retailers. Specifically, it didn’t drive traffic into the stores. So merchants started to pull out and the program closed. In some ways the blockchain solution is the opposite of Plenti.
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