Blockchain May Be in the Cards for Payments

Like others in the financial services industry, credit card giants including MasterCard, Visa and American Express have been experimenting with such blockchain-powered services as rewards programs and business-to-business transactions.

But recent patent filings suggest their experimentation may be moving closer to the heart of the transaction networks that power the more than 2.1 billion credit cards issued worldwide.

On July 17, MasterCard received a U.S. patent to manage “fractional reserves of blockchain currency” and essentially link cryptocurrency and fiat currency accounts. A few days earlier, the U.S. Patent Office revealed an American Express patent application for a blockchain-based proof of payment system that could “verify an earlier payment using a blockchain-based system.” The filing cites scenarios in which a purchase is made well in advance of the delivery of a service, such as concert tickets and travel.

There is competition from a wide range of companies seeking to disrupt the broader payments ecosystem.

Although an American Express spokesperson says the company doesn’t discuss the details of patent filings, it and other companies in the space have moved forward with several other publicly disclosed experiments in recent months.

“We believe [blockchain] has the potential to help us deliver new, innovative products and services, as well as transform existing business processes and applications,” Aimee Cardwell, vice president of American Express’ technology division, tells ThirtyK.

Present-Day Experiments

While patents represent potential products that may or may not ultimately be put into place, each of the three largest credit card networks have moved into real-world tests in parts of their businesses.

Visa continues testing its B2B Connect business payments service, which uses technology developed in partnership with enterprise blockchain developer Chain to simplify international business transactions. First announced in 2016, B2B Connect began testing cross-border bank-to-bank payments with partners in the U.S., South Korea, the Philippines and Singapore late last year. Visa anticipates a commercial launch of the service this year.

American Express is working with Ripple and a U.K. bank partner on a similar blockchain-powered international payments channel, “which we believe has the potential to expand substantially over time,” according to Cardwell. It has also introduced blockchain to its membership loyalty program, using Hyperledger’s Fabric framework “to allow merchants to create tailored offers involving Membership Rewards points on their own platforms, with the goal of deepening engagement and rewarding customers,” Cardwell adds.