Distributed Ledger Loyalty Payments With Merchant Currency Settlement
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Solution Overview
Problem
Existing loyalty points systems are cumbersome and inefficient, requiring consumers to carry multiple cards and manage loyalty points across different merchants, leading to discouraged participation and increased costs for merchants.
Innovation Solution
A distributed ledger system, such as a blockchain, is used to create a centralized platform for issuing, managing, and redeeming loyalty points across an intermediary network, allowing consumers to earn and redeem points seamlessly across multiple merchants and ensuring merchants are paid in actual currency.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If each merchant issues its specific loyalty card in a closed-loop system, then the merchant can track and manage loyalty points for its customers, but consumers are overwhelmed with carrying multiple physical loyalty cards and may forget to use them
Solution Approach 1:
The patent merges multiple merchant-specific loyalty card systems into a single unified loyalty card that works across multiple merchants. The system combines separate closed-loop systems into an integrated platform where consumers earn and redeem points across different merchants using one card, eliminating the need to carry multiple physical cards while maintaining reliable tracking through centralized digital records.
Solution Approach 2:
The loyalty card is designed with universal functionality to work across multiple merchants and different loyalty programs. The system enables a single card to serve multiple purposes: earning points at various merchants, storing points digitally, and redeeming points across the network, thereby improving consumer convenience while maintaining program integrity.
2Ease of operation
If a centralized loyalty points system is implemented, then consumers can use a single card across multiple merchants, but the system complexity and costs for managing the network increase
Solution Approach 1:
The patent introduces an intermediary processing system that mediates between merchants, consumers, and loyalty program administrators. This intermediary layer handles the complex tasks of point conversion, validation, and settlement, allowing individual merchants to participate in the unified network without bearing the full complexity of system management. The intermediary processes transactions and manages the distributed ledger, simplifying participation for all parties.
Solution Approach 2:
The system replaces traditional centralized database management with a distributed ledger technology (blockchain). This substitution eliminates the need for a single central authority to manage all loyalty points data, distributing the management across multiple nodes in the network. The distributed ledger automatically handles point issuance, tracking, and redemption, reducing system complexity and management costs while maintaining consumer convenience.
3Ease of operation
If merchants accept loyalty points from consumers, then consumers can redeem points seamlessly, but merchants face risks of fraud and need guarantees of actual currency payment
Solution Approach 1:
The system implements real-time feedback mechanisms where the distributed ledger continuously validates transactions, verifies point balances, and confirms merchant payments. When a consumer redeems points, the system immediately validates the transaction through the distributed ledger, ensures the merchant receives the correct currency equivalent, and updates all participant records simultaneously. This real-time feedback loop prevents fraud while maintaining seamless redemption for consumers.
Solution Approach 2:
The intermediary processing system acts as a trusted mediator between consumers and merchants during point redemption. It verifies the authenticity of points, converts them to actual currency for merchants, and ensures secure transaction processing. The intermediary's validation process guarantees merchants receive real currency payment while consumers experience seamless redemption, eliminating fraud risks without complicating the user interface.
4Adaptability or versatility
If an open-loop system is created allowing redemption outside the issuer's network, then consumers can use points at more merchants, but the system requires an intermediary to act between different merchant networks
Solution Approach 1:
The patent employs an intermediary system that connects different merchant networks and loyalty programs through a unified distributed ledger. This intermediary enables open-loop redemption by translating between different merchant systems and the unified platform, allowing consumers to use points at merchants outside the original issuer's network while managing the complexity of network integration centrally.
Solution Approach 2:
The loyalty card and underlying system are designed with universal functionality that works across closed-loop and open-loop scenarios. The same card and system infrastructure support both merchant-specific redemption and broader network redemption, providing adaptability and versatility without requiring separate systems. The distributed ledger automatically handles the complexity of cross-network transactions.
Data Source
AI summary
Decentralized computer systems and methods are disclosed for establishing and conducting payment processing with loyalty points using distributed ledger. One method includes: receiving a consumer identification, an issuer identification, and transaction information from a point of sale system when the loyalty card is presented for a transaction of a good or service at a merchant, identifying the network node containing distributed ledger associated with the issuer according to received issuer identification prompting, to participants of the shared ledger, to validate whether the consumer distributed ledger has required loyalty points for the transaction; if all of the participants of the shared ledger accepts the transaction, generating, a new immutable entry to the distributed ledger for the transaction with remaining loyalty points in the loyalty card after deducting the points required for the transaction; and sending a transaction approved message to the point of sale system at the merchant.