Closed Loop Payments & Loyalty Services

See how banks can use blockchain for loyalty and closed loop payments to significantly lower costs for merchants and consumers

Bypassing traditional currencies and payment routes

The arrival of mobile applications and mobile wallets has created a new payment regime for merchants, which creates challenges and major opportunities. In Africa and India we have seen the rapid take up of new closed loop payment platforms, while in Europe we are seeing the accelerating growth of mobile based Loyalty Schemes.

These rapid changes in digital customer experience, driven by mobiles usage, are changing the dynamics of the retail world, with m-commerce and in-store sales boundaries become increasingly blurred. For Merchant Acquirers this means that there is an increasing demand for new Value Added Services as well as overlap and convergence with the services of PSPs. These trends drive the need for new loyalty services, real time order and payment visibility, the ability to cope with new payment mechanisms (including digital currencies) as well as finding alternative to traditional POS platforms for in-store stock management

The new role banks can play

The opportunity to create closed loop payment models, or value exchange between consumers and merchants, drives the need for a virtual currency coupled with a ledger to track the user’s balance. Blockchain, as the underpinning technology for virtual currencies, particularly Bitcoin, is thus ideally suited to this task. The blockchain ledger can then be used to maintain balances as well as automatically calculating loyalty points, using a Smart Contract algorithm.

The distributed ledger model for blockchain also means that Capgemini can help your bank set up this system easily for a small local communities or individual merchants, creating the opportunity for local currencies or loyalty schemes. One of the consequences of the very low transaction costs, using the blockchain model, would be the ability to offer significant discounts to consumers and merchants over traditional banking and card charges.

The potentially public nature of the ledger and the transactions also means that questions of VAT and other taxes are straightforward to resolve, as all transactions can be easily tracked and can be made visible to empowered parties.

The distributed ledger could also be used to manage payment reconciliation and stock visibility across all channels in real time, putting the retailer back in control of the customer experience and sales process. Utilizing a distributed ledger based on blockchain enables the model to scale across multiple distribution outlets and channels over time, covering both physical stores as well as click and collect or delivery to the home. By integrating smart contracts into the ledger then the solution can automatically trigger re-ordering for a particular outlet as stock is consumed.

 

Capgemini has invested in proofs of concept using blockchain for closed loop payments. Our specialists can help you:

  • Create and operate community-based or closed loop virtual currencies or loyalty schemes at a low cost
  • Use distributed ledger to enable localization and federation of currencies and payment models
  • Maintain an immutable record of each transaction to ensure ready compliance with tax laws and payment regimes
  • Real time view of payments, orders and stock across multiple distribution locations and channels puts the Merchant in control of the sales process
  • Enable merchant acquirers to address the omni-channel demands of retailers in a cost effective, secure and scalable way (as an alternative to a traditional POS platform)

Talk to our blockchain payments specialists by emailing payments@capgemini.com or contacting an expert.

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