Electronic Trading System for Flexible Asset Redemption
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Solution Overview
Problem
Traditional purchase transactions often require immediate payment or incur interest and late-payment penalties, limiting flexibility and increasing costs for buyers using credit. Existing alternative systems like book clubs and frequent-flyer programs either obligate buyers to specific future purchases or restrict redemption options.
Innovation Solution
A system and process where consumers receive assets from one set of suppliers in exchange for a promise to earn points by making future purchases from a different set of suppliers, with the option to pay off points with cash, and an interest charge applied to outstanding balances to encourage timely purchases.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If consumers use credit to obtain assets without immediate payment, then purchasing flexibility is improved, but interest charges and late-payment penalties increase costs
Solution Approach 1:
The system applies preliminary action by charging interest on the outstanding balance from the moment of purchase until payment is made. This continuous accrual mechanism is established in advance and automatically applied, encouraging consumers to pay promptly while providing clear cost transparency. The interest charge structure is set up beforehand rather than imposed as a penalty later.
2Ease of operation
If book club programs offer goods in advance for future purchase commitments, then consumers obtain assets upfront, but buyers are obligated to purchase from specific sellers limiting flexibility
Solution Approach 1:
The system applies universality by allowing consumers to redeem their purchase commitments at any supplier within the network rather than being restricted to a specific seller. The commitment points can be used universally across multiple suppliers who participate in the network, giving consumers the flexibility to choose from various sources while still providing the incentive of upfront asset acquisition.
3Reliability
If frequent-flyer programs reward future purchases, then consumer loyalty is improved, but miles must be redeemed for specific services limiting choice
Solution Approach 1:
The system extends the applicability of loyalty rewards by allowing commitment points to be redeemed not only for travel-related services but also for a broad range of other goods and services from participating suppliers. This universal redemption capability maintains the loyalty incentive while significantly expanding consumer choice beyond restricted categories.
4Device complexity
If points programs restrict redemption to specific suppliers, then program control is improved, but consumer choice and market competitiveness decrease
Solution Approach 1:
The system applies segmentation by dividing the supplier network into participating suppliers who accept commitment points and non-participating suppliers. This segmentation allows the program to maintain control over how points are redeemed while still providing consumers with access to a broad marketplace. Consumers can choose from any participating supplier, and the system automatically handles the point redemption process, balancing control with consumer freedom.
Data Source
AI summary
A consumer is provided with a first asset in return for a promise to earn an agreed to number of points over an agreed to redemption period. The consumer subsequently earns the points by purchasing one or more second assets. At least one of the second assets is different than the first asset. Each purchase has an associated point value, at least one of the point values being different than at least one other point value.An electronic trading system includes a first set of web sites where a consumer can select a first asset it wants to obtain in return for a promise to earn points by making future purchases of one or more second assets.The number of points which the consumer must earn varies as a function of which of the first assets is selected by the consumer. The consumer can fulfill its obligation to earn the stated number of points by purchasing one or more second assets at a second set of web sites. Each of the second assets has an associated point value.