Blockchain “Potential Value” in the Healthcare Industry

BC in HC

Visualize the Healthcare ecosystem comprising of patients, payers, providers, pharma/bio majors, and medical device companies. The Blockchain Technology combined with other relevant digital forces can augment the right set of capabilities in the Healthcare Ecosystem. The blockchain technology alongside Electronic Health Records, IMoT (Internet of Medical Things), Healthbots, AI/ML, Cloud and Analytics can create the capability foundation for the healthcare industry.  The blockchain bundled capability engine thereby enables the four drivers as described below.

  • Consumerization: Transforming from wholesale to retail healthcare. The patient or consumer now can expect the same experience in healthcare like in all other parts of their “consumer life.” Blockchain can enable a radical change in driving patients to take advantage of connected technologies, social tools, and information activities in their own health and that extends further into the broader marketplace.
  • Personalization: Healthcare industry has historically treated patients en masse. But the move from the group to the individual is inevitable now. Blockchain empowers health players to build loyal relationships with consumers offering more choices.
  • Diagnosis & treatments: Blockchain can create a single source of medical truth of patient that can’t be tampered making the doctors better at their jobs – quicker, more accurate, and fact-based expediting the quality of diagnosis and treatment.
  • Communications: Enabling doctor’s effective and easy communication with patients for improvising care coordination is another pertinent role of blockchain technology in healthcare.

The above drivers collectively are positioned to deliver the following outcomes to healthcare ecosystem.

  • Patients: Improved experience with better care coordination
  • Payers: Shift from B2B to B2B2C models
  • Providers/ISVs: Better usability enabling on-the-go services and health predictability

To better contextualize Blockchain Technology in Healthcare ecosystems, the relevance of technology for Patients, Payers, and Providers is discussed below.

I. Blockchain prominence for Patients:

Patients can benefit from improved experience from better health coordination. With blockchain technology, patient health records can be cryptographically secured and shared among healthcare stakeholders, increasing interoperability in the ecosystem. Use cases for blockchain are getting started with projects that reduce duplicative work but eventually shift to a system where the patient’s control access rights to their data. The following is one of the paths of evolution of blockchain in healthcare,

  • In short term it is more of a closed consortia, PoCs, managing providers information, bringing drug supply chain on the blockchain, but not really porting patient data on the blockchain.
  • In the medium term, systems can scale with permission of stakeholders and handle some patient data. Applications include claims management, payments, and prior authorization, health information exchange & research data, and trial design data etc.
  • But over a long term, a patient-driven blockchain system with master health records and access rights in the hands of patients is a definite possibility.

To design a robust blockchain solution, the architecture should store and scale voluminous transactions, urgent data, and more on a blockchain, while larger data storage needs could be met by private repositories. The bundled On-Chain and Off-Chain solutions can be built to solving both scalability and data sensitivity needs. A typical blockchain solution for healthcare patients’ data can be described as follows.

Data is generated about a patient, a doctor’s visit occurs etc. Transactions are recorded on a public, view-able blockchain, which also designates the location of the data. The data is stored “Off-chain” in private data repositories. Patients give a third-party access to their records via public/private keys. Data is located, decrypted, and retired from storage on-demand.

Blockchain could bring patients to the center of the healthcare ecosystem by giving them the power over one of their most valuable resources – data

II. Blockchain driven Improvements for Payers:

The blockchain is driving the transformation in Payers and/or Health Insurance space to reimagine business models progressing from BB to B2B2C channels. As per the analyst reports, 5 to 7% of claims are denied due to inaccurate or lack of information. Imagine blockchain technology offering an opportunity to automate the claim process and simplify the administrative processes to reduce transaction costs and minimizing frauds.

How Blockchain technology does this is by leveraging the consensus with smart contracts, maintaining a benefits database, determining patient insurance for self-execution with SOPs driving terms and conditions. This will potentially bring in a discipline of pay for outcomes and incentive-based behavioral health programs that offer peer-to-peer insurance models. Imagine a day where patients have a peer-reviewed and/or a peer-adjusted claims system.

III. Blockchain-based Collaboration for Providers:

Healthcare providers could be hospitals, medical device companies, pharma or bio majors and many more. Let us examine the following opportunities.

  • What if blockchain enables a multi-fold increase in medical device makers ability to bring their devices onto a medical IoT platform solving the current data privacy and security concerns? Blockchain can enforce medical device identity management by promoting IMoT and as well cryptography techniques can offer an additional layer of trust to minimize cybersecurity threats for medical devices. Blockchain also ensures patient privacy by proving secure and selective access to their health data.
  • Serialization and counterfeiting are few of critical issues pharma supply chain faces today. It is a multi-billion dollar problem to solve. Blockchain ability to create a chain-of-custody log of a pharma value chain can enable drug manufacturers to track each step of the supply chain at the source by raw martial or constituents and their origins. Blockchain also offers the technological feasibility to automate serialization process across the pharma supply chains

Blockchain technology has the potential to exponentially add value to the healthcare ecosystem offering significant cost savings, enforcing privacy and security, creating a chain of custody for pharma value chain, improving collaboration, and simplifying the claims processing.

I welcome further discussions on this topic via email kishor.akshinthala@gmail.com.

Refer to related blog posts below:

https://akshinthalakk.com/2018/02/10/counterfeit-combating-with-blockchain-technology-2/

Marching Ahead to 2019

2019

Here is my take on the next 3 big trends to watch out as we march ahead into 2019.

1) Automation crossing over inflection point: Point I am making is progressing beyond task automation. For example, when we call a Bank, it really doesn’t matter whether a bot or a human reply from creating the net new value and better customer experience point of view. In fact, speaking to human can avoid following initial mundane activities alongside a BOT. Having a BOT may save cost and make operations efficient for a Bank, but what’s in it for the customer? Secondly, Automation has to elevate to be more intelligent and process-centric than taskmasters. That is what the inflection point for automation progressing to “creating value for consumers”.

2) “Shared to Distributed” economy/business models as a path forward: Over the past years Uber, Airbnb, Google and increasingly proliferated shared economy models are been successful use cases that rely on the contributions of users/external resources as a means to generate value within their own platforms. Unlike the Automation, here consumers get direct value from the shared economy models and better experience. But the shared economy model is still centralized and hence prevails risks limiting full potential. The shift is going to be towards a new model of decentralized organizations that are aggregating the resources of multiple people to provide a service to a very active group of consumers. This shift marks the advent of a new generation of “dematerialized” organizations that do not require physical offices, assets, or even employees.

3) The confluence of Digital technologies fuelling the next-level adaption/growth: We make a progress beyond adapting one or two digital forces towards the convergence of the ecosystem of digital technologies that drives the collective benefit of businesses, consumers and all stakeholders.

Blockchain Reference Solution Architecture (BRSA)

BRSA

I have been publishing Blockchain perspectives over the past couple of years and rarely come across the real details on what it takes to implement a Blockchain solution. Nailing down the solution architecture is “where the rubber hits the road” in preparing an enterprise to gear up for blockchain implementation. Initially thought of offering a detailed technical architecture diagram which can easily lead to misinterpretations. Hence getting focused on describing a “Blockchain Reference Solution Architecture (BRSA)” in this blog post.

I would envision the following 6 foundation layers of BRSA and narrate it with a CPG use case for implementing Blockchain for “Diamond” product class.

1) User Interface: Any solution starts with a user-friendly UX. In our use case, let us say consumers walk into a jewelry store with an intent to buy a diamond for his fiancee. The consumer is”digital-aware” and carrying a mobile and an app on it that is designed to the diamond supply chain to gain the confidence of purchase. Henceforth one of the key features of the mobile app is a read-only application in the first place and will therefore not require any log-in. The consumer then is able to scan a barcode, RFID sensor, QR-code or for that matter invoke computer vision and access the information related to a particular product (in this case diamond) that may involve multiple the steps in the supply chain and tracking the source etc.

2) Data/File Storage: The next solution component is designing file storage. Typically the information stored in blockchain includes contract verification, hashes, and identification of who has added this information. In our example of diamond products, if a miner at source takes a photo of diamond drawing/marking at the source and add it to the blockchain. How this data could be stored on the blockchain, is a critical solution element and the following are 3 possibilities for storing that photo,

  • Upload to the blockchain and make it transparent to all the nodes in the blockchain, but this requires the blockchain to store a significant amount of information.
  • Upload photo to a separate database but accessed by the blockchain. Access can be restricted or open for everyone who interacts with the blockchain.
  • Store in a database that is owned or controlled by an administrator to upload the photo, but it is not possible to access through the blockchain. Only the creator of the file/photo decides who they want to share their data with.

Hence deciding a right data storage mechanism is a critical component of the BRSA component.

3) Blockchain Platform: Choosing the blockchain platform is the next step in the solution design. As mentioned above, the blockchain platform verifies files, contracts, and stores transactions. Platform options include public, private or a hybrid. Platform selection for diamond use case is primarily driven by transaction costs to a least and transaction capacity near real time. The public blockchains platforms include Bitcoin and Ethereum etc. If not the transaction costs, Bitcoin is not considered in this case due to a very low transaction rate. Even if the transaction cost in Ethereum is significantly lower, transaction capacity is still limited. Both transaction costs and transaction capacity be a restriction in a price/service sensitive CPG products. One way to handle this is to go for second layer solutions as they get matured. On the other hand, private blockchain can be most attractive, but only trusted partners are allowed to validate transactions and blocks. The validated and recorded content of the blockchain may or may not be published to the public. The platform selection is really a trade-off

4) Application / Smart Contract: The application or smart contract is another key element of the solution. The most well-known blockchain solution for applications is Ethereum, where the contracts are called as distributed applications (dApps). The applications are run on the blockchain by all nodes, they are distributed. In some other cases the contracts are not run on the blockchain – they are confirmed in the blockchain, and their verifications are embedded in the blockchain but the entire application is not run by the blockchain network. For generating a diamond smart contract, the diamond store must upload the GIA certificate for each stone to be listed. Tracking can be enabled for a single diamond of high value or for a basket of diamonds. The blockchain solution can be designed for distributors listing their diamonds, or for peer-to-peer sales. The transactions here can be virtual but in our case, it is physical in store, and a secure completion of the purchase could trigger the delisting of the smart contract. Many technology providers want their applications to be possible to run on different blockchains and this is much easier if the application is not run by the blockchain. This could potentially be an option for our use case.

5) The ID and authorization: The key CPG actors who are going to authorize the different steps in the process have to be identified and some sort of ID solution is required to be built into the overall architecture. In our use case, either diamond distributor can handle the ID-creation and directory within the blockchain system, or rather create the ID-system and let the private administrators of the system be responsible for the ID-solution. The system then creates the private and public keys of the participants and may use extra security such as IP-addresses to control for the authority of the actors. A simple barcode-based unique ID can incorporate complex data science models to create a unique signature for either a rough or a polished diamonds.

6) Asset Registry: In diamond CPG industry there exists many organizations and authorities that can have an interest in labeling the products with their certificates. Hence in our use case, there should exist a public authority to assign a code to keep track of the diamond and their production. After creating the signature as described in the previous step, diamond can forever be verified against it to prevent fraud of any kind. The amount produced or sold by the diamond maker etc. will then get a code in the blockchain and lives on immutable.

All the above components collectively build a robust solution architecture as depicted in the diagram above for implementing the Blockchain solution for Diamond CPG supply chains.

CPG Blockchains

scmCPG Supply Chains are undergoing an unprecedented change looking out for new ways of improvement. I am focusing on this blog on how net-new technologies including  Blockchain is transforming the CPG supply chains.  Evaluating few real-life examples in CPG space triggering a discussion on Blockchain relevance in CPGs.

CPG sectors that benefit from Blockchain are widespread. Fashion products, which is one of the prime CPG sectors ripe for Blockchain adaption where supply chain provenance plays a significant role. The other product classes include garment or makeup products, fine wine, art, luxury items or for that matter diamonds that can benefit from Blockchain adaption. I have been evaluating on how CPG companies can promote an “ethical fashion” or “ethical products” with Blockchain based applications. Let us dive into details.

Blockchain relevance to CPGs:

Focus areas chosen are supply chain provenance, transparency, counterfeiting, and sustainability. The enterprise-wide Blockchain platform could help to increase business velocity, create new revenue streams, and reduce cost and risk by securely extending the supply chain to drive tamper-resistant transactions on a trusted business network.

Provenance & Transparency: Do you agree that the relationship between CPG supply chains Transparency (access to information) is not always linear & straightforward with Traceability (provenance)? Let us look into how to build a Blockchain based solution for CPG supply chain provenance.

Blockchain could help in improving the transparency of the fashion supply chains, promoting sustainability and addressing fashion companies’ lack of ethical supply chains that are contributing to >10% global emissions, and as well in combating to counterfeiting.

Blockchain can play a role in transparency in transforming fashion supply chains through technologies such as track and trace and inventory management. With Blockchain, it is possible to create physical – digital link between goods and their digital identifiers. Cryptographic seal or serial number can be used as a physical identifier linking back to the product’s digital-twin. An example to quote is “Better Kinds”, with a focus on decentralized manufacturing allowing everyone to know where your clothes come from.

Counterfeiting: Blockchain solution as well helps fashion CPGs in combating counterfeiting by recording on blockchain every time goods change-in hands. The chain of custody on blockchain provides a record of the last party to gain custody of the product, showing where the counterfeit product slipped in, or an authentic product got diverted. Read my blog post, Combating Counterfeiting With Blockchain Technology

Sustainability:  The promising outcomes of Blockchain in this space include, sustainability gains in the form of reduced environmental impact and better assurance of human rights and fair work practices. Having a clear record of product history helps product buyers to be confident that goods being purchased are coming only from sources that have been recognized as being ethically sound. More accurately tracking substandard products and identifying their occurrence further upstream in supply chains will help reduce the scope of rework and recalls, providing considerable greenhouse gas reductions and other resource savings. the ultimate goal of Blockchain will be improved supply chain optimization gaining access to a more complete longitudinal supply chain datasets eliminating redundancies and bottlenecks, and ultimately, decreases in resource consumption.

Blockchain implementation process for CPG Blockchains:

Blockchain solutions could help fashion CPGs in their brand positioning as environment-friendly and tech-savvy. Existing technologies like ERPs, Enterprise Data Warehouse, Integration Technologies, and existing e-commerce website can enable provenance, but with practical limitations.  That is where new technologies including Mobile App Development, Public/Private Blockchain Platform, Crypto-Fiat payment gateways & wallets, Digital-Twins, Artificial Intelligence and Advanced Analytics, IoT Sensors, Robots & New Handheld device Hardware etc.

Blockchain implementation for CPGs is an art. The new technology adaption process includes building a public or private blockchain network bringing connecting all key stakeholders using a DLT. Create a token that promotes the use of such application and potentially incentivize the users and suppliers. Create wallets to store tokens and collect incentives. Integrate with payment gateways and exchanges. This forms the Blockchain Core. Then build business and application logic with workflows that support the provenance functionality. Integrate the Blockchain core with back-end transaction systems and ensure seamless flow of information ensuring the data integrity and privacy. It may be a good idea to consider a second layer solution for improved transaction rates and at the same time confining certain confidential information, in this case, supplier data to open access to all competitors via a blockchain. Developing a mobile app and lastly, integrating UI, Application (Blockchain Core) and back-end systems. A brief description of 3 layers of foundational architecture is provided below.

  • User Interface: Customer experience plays a significant role in provenance applications. Should have access to a friendly UX that should support consumers to be able to walk into their favorite retailers, use phones and scan the tag on a garment or makeup product to be able to pull up full supply chain information.
  • Application Logic: Build business and application logic with workflows that support the provenance functionality. This is the core platforms that developed and rolls out provenance application.
  • Data and Back-end Transactions: Brands should get a better handle on what’s really happening in their production processes and chosen technology should relieve a logistical headache by streamlining the record-keeping and verification processes. Second, it requires brands to voluntarily invite their suppliers (who will need to in turn invite their own suppliers, and so on down the chain), to adopt the technology.

How to calculate ROI for CPGBlockchains?

Setting up a Blockchain based application for CPG supply chain provenance involve a capital investment for infrastructure and development costs and ongoing maintenance costs. ROI is a derivative of whether such application attracts more consumers demand and/or willingness of consumers pay additional fees for access to truth and sustainability and/or reduced costs of the current supply chain with streamlined operations. Hence ROI should be computed as “[ Increased revenues from consumer demands & adaption + Premium fees consumer willing to pay + Reduced costs of supply chain operations – Total Investments & Costs (CapEx+OpEx)]

The real ROI of Blockchains come from handling the volume of CPG products and transactions having a second layer solutions to offload/ off-chain transaction volumes from core Blockchain. Estimating components is a challenge in computing Blockchain ROI. But there exists an opportunity to estimate parameters with a degree of accuracy. Such parameters include,

  • Improving the efficiencies of running workloads. Smart contract automation can save significant time in real life transactions avoiding manual interventions
  • Cost reduction is a great value in horizontally integrated supply chains. Blockchain can easily create a global view without expensive third parties
  • Increased trust among key stakeholders that would improve supply chain performance
  • CPG/Retail plastic/waste management can be incentivized leading to a better sustainability

Let us examine use cases:

The following two case studies offer a great insight into how Blockchains can enable provenance. From these examples, taking a value chain based approach for identifying incremental benefits along various supply chains components could fairly offer potential ROI perspective from Blockchain adaption.

  1. Examining the Everledger based blockchain application for traceability of diamonds. The key challenge of the diamond industry is certification of the ethical origin of the diamond. Noticed that Everledger has been trying to create a database of diamonds registering on the blockchain to certify the final cut diamond was ethically-sourced from “conflict-free” regions. Such examples can be used to create an anti-counterfeit database for other valuable goods such as fine wine and art.
  2. Moving on to another example, Blockchain enabled traceability application for yellowfin and skipjack tuna fish. The Etherium based platform trying to track the entire supply chain from fishermen to distributors. End users could track the source of their tuna fish sandwiches via a smartphone. This platform would enable determination of information about the producers, suppliers, and procedures undergone by the end product. allow confirmation of a given fish’s origin tracking the supply chain. Such a solution would present a viable model for product certification to an end consumer.

In Summary…

The complex blockchain solutions will provide an unprecedented level of transparency and traceability, to build the highest level of trust in the sustainability of the CPG supply chains. The CPG products are able to be traced on the blockchain through their unique tracking code with the information collected from linking all information sources within the global supply chain covering from the source through the production process up to the final point of sale as described in the case examples above.

Working as a single source of truth, Blockchain can change the way business transactions take place. From a supply chain perspective, such visibility will help ensure efficient transactions, while promoting safety, efficient recalls, the elimination of counterfeits, and the assurance of ethical trading.

I continue to research further on Blockchain relevance to CPG supply chains. While the core principles of Blockchain are being established, the companies adopting the new technology progressively evolve alongside. ABC (AI+Blockchain+Crtptocurrencies) continues to significantly alter Retail / CPG business models.

Reach out to me for further discussions @ kishor.akshinthala@gmail.com.

Real Estate Blockchain Ecosystem “ReBe”

ReBe

I was contemplating to title this blog “Enriching real estate buying experience with Blockchain”, but finally chosen the title “Real Estate Blockchain Eco-system” to brand the collation of ideas as “ReBe”. As you got the crux of the topic and let us dive into details.

Investment Opportunity vis-à-vis Technology Advantage of Blockchain is an ongoing debate. My focus on this post is to underpin technology advantage of the blockchain. While in-numerous use cases are popping up on the blockchain, I have been thinking about enriching real estate customer experiences expanding real estate market opportunity with distributed, trustless, auditable, and immutable nature of blockchain technology.

From the latest MSCI report, the size of the professionally managed global real estate investment market grew marginally from $7.1 trillion in 2015 to $7.4 trillion in 2016. Currency movements distorted national changes. Currency movements effectively reduced the size of the global real estate investment market by approximately 2.3% in U.S. dollar (USD) terms. Let us break down real estate opportunities and analyze areas where blockchain can show higher impact. I will start by asking a question, what if blockchain could help taking out currency movements? That itself leads to a potential of addressing $170 Billion opportunity size. How about addressing the following plausible areas with blockchain technology?

Blockchain Relevance to Real Estate

The six core characteristics of blockchain namely “Immutable, Consensus, Encrypted, Transparent, Programmable, and Distributed” positions the technology to handle/transact almost every element of a real estate value chain on a blockchain. In buying a real estate, whether it is commercial or retail, the current inefficiencies along the value chain can be replaced with a blockchain platform that can make it better, faster and cheaper. Here is a peek into details.

1) Property Search and Records: Search can be enabled by peer-to-peer listing platforms that allow buyers and sellers to transact directly with one another and reduce or eliminate commissions. One property is found the property owner has to be confirmed. For any kind of a high-value property (real estate, cars, art) it is important to have accurate records which identify the current owner and provide a proof that he/she is indeed the owner. A blockchain based property ownership recording system described in this article eliminates most potential failures and attacks through transparency and use of cryptographic primitives for authentication. Thus it can be used to eliminate reliance on trusted third parties, reduce costs (through automatization) and avoid number fraud and errors. For example, REX MLS blockchain platform provides an open, decentralized and democratized environment for listing and transaction processes

2) Property financing and lending: Blockchain can facilitate financing, investment, and crowd-ownership in real estate dealings.

  • Blockchain can leverage crypto backed native currencies as a means of payment in real estate transactions, which can involve considerable regulatory issues (e.g. KYC, AML) minimizing transaction fees and potentially eliminating cross-border currency fluctuations in a global marketplace.
  • Blockchain technology can be used as a means of crowd investing/funding in real estate tapping into funds beyond banks and institutional money.
  • Other possibilities include the noteworthy business models that seek to issue a regulated, blockchain-based cryptocurrency secured by shares in Real Estate Investment Trusts (REITs).
  • The current owners of real estate can monetize full or partial ownership of these assets creating liquidity with ease of technology. For example, the UK government’s “shared ownership” scheme helps first-time buyers get on the property ladder by purchasing part of a property and paying rent on the remaining value. Renters can buy additional equity in the property as and when they can afford it, a process known as “staircasing” Blockchain enables more efficient processing of financing and payments

3) Lease and Rental Management: Blockchain technology can automate most of rental and lease management processes leveraging “smart contracts” by shortening the cycle time of reconciling rental payment and property expenses cash flows by providing full transparency. This will finally lead to reduced accounting, property management, and compliance costs. Blockchain driven student accommodations is another evolving trend in this space.

4) Titles and closing: Blockchain enables transparent and relatively cheaper property title management. Distributed ledger technology combined with smart contracts can potentially eliminate escrows. This is possible by altering the real estate transactions by combining identity verification with escrow. In place of a title company, buyers could make a purchase in crypto backed native currencies by sending the funds to one party and title to another without the need of escrow. Another advantage is minimizing the wire fraud impacting the real estate industry. In the traditional real estate closing process, numerous intermediaries are utilized and get paid which increases the lead times and associated costs. By assigning each property to a digital address, blockchain can significantly reduce the number of intermediaries by reducing costs and lead times in multifold.

5) Add-on Services: Blockchain can potentially be extended to multiple add-on services enabling end-to-end real estate processes. These services include but not limited to expediting pre-lease due diligence, ease leasing and subsequent property and cash flow management, offering real-time rich data promoting smarter decision-making, blockchain based land ledger etc.

Real Estate Blockchain Ecosystem (ReBe)

Each of the above real estate services can be a blockchain offering in itself. But what I am trying to project in this post is a Real Estate Blockchain Ecosystem (ReBe), a portfolio of services to offer an enriched and optimal end-to-end real estate solutions. As depicted in the diagram above, ReBe ecosystem constitutes multiple layers.

  • First Layer – Blockchain Core: The center layer with a ReBe Token, crypto exchange, smart contracts, and a distributed ledger based financial system creating ReBe technology platform. ReBe token is envisioned as a hybrid token with a utility service to pay network fees and a security that backed by a real estate asset offering collateral and a possible monetization of assets.
  • Second Layer – Blockchain Services: A portfolio of services can be built around the core layer that forms the “Blockchain Services Layer”. Here a catalog of services either building a partner ecosystem of existing platform players or pay-per-use platform services for participating service providers.
  • Third Layer – Marketplace: The third layer is the marketplace of buyers, sellers, crowdfunding, banks, institutions and legal entities that leverage blockchain services. An example of a marketplace transaction could be Peer-to-peer property transfer or rent.

Blockchain technology is fast changing the property buying experiences and I foresee an existing opportunity in reshaping the real estate industry with ReBe. You can reach me @ kishor.akshinthala@gmail.com for a deeper mindshare on this topic.

Enhancing Gift Cards Value Proposition (Blockchain for Gift Cards – Part II)

Last week, I published a blog post titled “Blockchain Boosting Customer Loyalty Programmes”. In continuation of views on Blockchain relevance, highlighting the following 4 aspects of gift cards industry that encompasses open & closed loop cards, new age innovative cards such as gift cards for stock, lottery retail gift card, donation gift cards etc.

1) Transaction fees

2) Seamless redemption

3) Consumer wallet spends

4) Fraudulence

1) Transaction fees: Gift cards market in the USA alone is estimated >$170 billion and growing at ~20% CAGR internationally across channels of stores, web, mobile, incentives, employee engagement etc. As per GiftCardsdotcom, processing fees on various types of gift cards range from 1.4% to 3.94% and lower the value of card higher the fees even touching double digits. This as a result of cumulative effect of various stakeholders in the value chain including the issuer, distributor, reseller, buyer, & receiver. Can we bring them on DLT to checkout fees?

2) Seamless redemption: Gift card industry is set up to hide identities of unspent balances on gift cards called “breakage”, which accounts to ~20% total spend i.e. $34 billion. Combining gifts, rewards, loyalty and coupon credits in one place/platform, making them available for immediate use can be one solution to this. Such platform as well can enable auctioning, trading, regifting and donating to charity features creating value for unwanted cards that expire. Can blockchain technology be leveraged for generating net new revenues from seamless card redemption?

3) Consumer wallet spends: Lack of single source of truth and shopping data has been limiting the scope of consumer wallet spend expansion. Overspend dynamic is really an upside, and analysis shows that when consumers shop using gift cards they spend an average of 30% to 40% more than the face value of the card credit. How about combining AI+Blockchain+Cryptocurrency (ABC) to increase the effectiveness of advertising by retailers to increase consumer wallet spend?

4) Fraudulence: “Return fraud – thieves simply walk into Walmart, Target, Home Depot, Lowe’s or another big-name retailer, steal an item, return it at a different store without a receipt and receive a gift card in return, which they can then turn around and sell to a pawn shop or secondary store for a lower price” (dangerous than cyber fund) is a new form of fraud in Gift Cards environment. Retail return losses total of $9 to $15 billion per year, 2017 survey by the National Retail Federation. >50% of companies reported fraudulent gift cards or store credit in one or more locations. How about applying blockchain technology enabling people who don’t trust one another share valuable gift card data in a secure, tamperproof way making it extremely difficult for attackers to manipulate?

Blockchain technology precisely addresses these factors and fuels the growth of gift cards industry leapfrogging customer loyalty experience and enhancing gift cards value proposition.

Refer to Part I @

https://akshinthalakk.com/2018/06/23/blockchain-boosting-customer-loyalty-programmes/

 

Boosting Customer Loyalty Programmes (Blockchain for Gift Cards – Part I)

Untitled

Getting little bit into history, reward programs spans over a century (~120 years) with S&H Green Stamps in late 1800’s, the launch of modern programs by the airlines ~35 years ago, and to the recent coalition programs like Plenti’s initial marketing partners that include Macy’s, AT&T, Exxon Mobil and Rite Aid.

According to the 2017 Colloquy Loyalty Census, there are 3.8 billion individual loyalty memberships in the United States increasing from 2.6 billion in 2012. Every day we come across some sort of customer loyalty and reward programs in our daily lives while consuming products and services across industries that represent the spread of memberships in retail – 42%, travel & hospitality – 29%, financial – 17%, media & content, the cross-section of these industries and as well as others representing remaining 12%.

With that being said, loyalty and reward programs are facing the underpinning threats as well as bundled with few opportunities as described below. In view of this, Providers of loyalty programs should focus on their long-term sustenance and growth strategies. The following metrics are compiled from Kobie and Colloquy reports.

Threats:

  • Only 46% of loyalty memberships in the USA are active leaving behind more than half of all memberships inactive
  • Over 70% of consumers in the age group of 20 to 34 years old said they would change where they shopped to get more loyalty rewards

Opportunities:

  • 34% of USA consumer say they are loyal to a brand because of its loyalty program
  • Loyalty/reward programs with integrated sustainability, contribution to the environment and quality of life are scoring more than the rest

In the above context, Blockchain technology can play a significant role allowing the providers to integrate store locators, payment vehicles, loyalty programs, even games, in a platform that enables information always to be at the consumer’s fingertips. The blockchain based platform can offer convenience, rewards, ease of use and customer experience combine to build consumer loyalty, engagement, and advocacy.

Traditionally most rewards programs use a proprietary “points system”. Customers can accumulate points for purchases at a rate that was set by the issuer and finally uses the points to purchase merchandise at a redemption ratio set by the issuer which is somewhat regulated. 3rd party fulfillment usually handles the redemption hosting the user redemption via an online web framework, maintain and keep the catalog of rewards, administer point balances, manage promotions, ship rewards, and deduct the points in a systematic manner. As you can realize by now the multi-party loyalty systems are somewhat circumvented and that leads an opportunity for disintermediation. The recent developments with blockchain technology seemingly offers an effective alternative to run loyalty programs.

As depicted in the diagram above, the entire ecosystems of loyalty & rewards programs including providers, channel distributors, customers, incentives & payments firms can be seamlessly integrated onto a blockchain core to enhance the overall value proposition. Blockchain can enable a ledger of transactions to be shared across a network of participants. When a loyalty point is issued, redeemed, or exchanged, the blockchain’s AI algorithm-generated unique token could be created and assigned to that transaction and distributed across the loyalty network, updating every ledger simultaneously. Loyalty participants can validate the new transaction and link them to older transactions, creating a strong, secure, and verifiable record of all transactions, without the need for intermediaries or centralized databases. However, for security and privacy of loyalty programs, it may be logical to design a closed-loop rewards program, where only those parties involved in the loyalty program, issuers and merchants, would be allowed, which resembles a private or a permissioned blockchain.

If you can visualize, in loyalty platform backed by blockchain, the points associated with the rewards systems can be deposited by the issuer in a customer crypto wallet that would be available to immediately spend at any of the merchants that accept that cryptocurrency and participate in that closed blockchain. The issuer would no longer need to carry the liability for all unused points on its books, which is estimated at ~10% leakage of rewards that expire and can be written off with no redemption costs. To compensate this blockchain based systems can deliver cost savings in redemption by eliminating the third-party fulfillment function, along with the associated fees for those services. The cardholder would no longer need to log in to the fulfillment website to redeem points for merchandise or travel. Instead, the rewards currency could be used to purchase from any merchant, e-tailer, travel site or brick and mortar that accepts that rewards currency. Presumably, this would be a closed loop of possibilities, to avoid the problems that merchant consortiums such as Plenti had to deal with. Each merchant would then need to balance their prices, in the rewards cryptocurrency, in order to increase the potential for the cardholder to spend with them, but still maximize profitability. The inefficiencies arising from the issuer paying fees to a third party could be put back towards the issuer’s reward program, the payback for giving up the “breakage”. This, in turn, would allow the issuer to increase its rewards.

One would think now about how to handle a sporadic crypto price fluctuations? One way to address this is by keeping the rewards currency, not as a tradeable token on exchanges making the blockchain a permissioned network allowing only issuers who participate in the program, and merchants who are willing to redeem could be nodes keeping the expense and time delay of each transaction to reasonable costs and near-real-time. The participating nodes can be designed to perform a proof-of-cooperation calculation to maintain the integrity of the transaction.

To sum it up, leveraging customer loyalty blockchain platform,  the issuer no longer sets redemption ratios in the future-generation model of card rewards & redemption, removing any ambiguity as to what each reward point is worth. This allows merchants to price their goods at market rate to encourage purchase, removing hidden markups and resulting in loyalty truly becoming a currency.

Refer to Part II @

https://akshinthalakk.com/2018/06/30/enhancing-gift-crads-value-proposition-blockchain-for-gift-cards-part-ii/