Blockchain and the Coupon Industry
A New Dimension of Bargain Hunting
PURA Vida everyone! Readers from North America, remember how your grandmother would clip coupons from the Sunday newspaper? She wanted to make sure that she wouldn’t miss the best deal at the grocery store in the week ahead. Not much has changed. We do live in an era when disruption by the digital revolution affects nearly every industry. Many documents come in paperless format. However, the coupon industry still depends largely on print and media for distribution. While stores and manufacturers market digital coupons, growing in popularity during the longest recession since the Great Depression and everyone looking for a bargain, it ha become a $573 billion industry in the United States alone. Yet, only two percent of those coupons are redeemed digitally. The result is crippling fraud while opening the door to innovative marketing opportunities.
The Problem with Coupon Fraud
Losses vary per store. However, a realistic cost estimate of coupon fraud is between $300 million and $600 million per year. Scammers steal inserts and sell coupons, altering their values and creating forgeries. They buy items with fake coupons, return discounted items for cash, or resell stolen goods. Most marketers openly admit that it is not easy to track or obtain the identity of individuals. Most customers still redeem printed coupons or use those distributed in traditional methods. Luckily, blockchain technology and its cryptographically secure decentralized/shared ledgers is at the rescue. Blockchain offers game-changing technology the coupon industry lacked in the past.
A New Way of Tracking Records
A company called A7 Core believes its developers have created a solution utilizing blockchainand sophisticated artificial intelligence technology to track and record coupons. A7 Core provides a tested platform that claims to reduce fraud exponentially. This platform saves brands billions of dollars in transaction fees while fostering closer relationships with consumers. Another blockchain coupon platform offering a global solution to producing trackable, verifiable, and secure coupons for manufacturers is The Rouge Project. All the coupons that the Rouge Project produces are wholly digital and initiated by smart contracts. MasterCard, in search of both a solution and opportunity, has felt the impact of chargebacks due to coupon fraud, announcing in May that it had secured a patent for a system that uses blockchain technology to authenticate coupons.
Granted by the US Patent & Trademark Office (USPTO), MasterCard’s patent outlines a way for merchants to cut down on coupon fraud and more effectively issue targeted discounts to specific customers. In one potential application of this system, an individual receives a blockchain address. A payment instrument such as a credit card or digital wallet application stores the individual’s credentials. When the user attempts to redeem a coupon, the point of sale device interfaces with the private blockchain network. The network verifies that the customer qualifies for a discount. Following a successful transaction, the system will automatically transfer the coupon out of the customer’s wallet and into “burn address” or an address associated with invalidated coupons. The recording is immediate, preventing any user from redeeming it multiple times.
Loyalty Rewards in the Digital Age
MasterCard isn’t the only major credit card issuer experimenting with blockchain technology related to coupons and loyalty rewards. American Express recently announced it was using blockchain technology to revamp its program using a new system based on Hyperledger. Merchants could create more versatile membership rewards offers for Amex customers on their own platforms, even allowing businesses to assign their own bonus points to individual products.
Such systems are to help merchants prevent coupon fraud, but MasterCard and AmexCo also understand that businesses like theirs utilizing blockchain technology will gain them an edge with consumers. The ability for brands to issue more valuable coupons ensures discounts are not counterfeited or redeemed by unauthorized users. At the same time, this opens the door to more effective marketing around a multi-billion-dollar industry directed at multiple generations, classes, and segments of new consumers.