Manifold Technology has realised the friction within banking rewards programmes is just a symptom of a widespread disease affecting the reconciliation of internal accounts at large financial institutions.
It's a malaise blockchains can cure, believes Chris Finan, CEO, Manifold Technology, which is one of the blockchain partners chosen to be part of the Microsoft Azure BaaS cloud offering. The Manifold Liquidity Platform targets reconciliation challenges and aims to synchronise transaction activity across business units, merchant partners and borders.
Core account reconciliation and settlement has become a huge pain point for banks internally, said Finan. "They have thousands of people working on this, often using back offices in South Asia. It's a highly manual, expensive endeavour for them to reconcile their accounts internally. And that sort of underlies all of the other elements of their business.
"It became apparent to us that rewards was a good example of a symptom of this core problem, which was they were having to process data in batch, they couldn't provide feedback to consumers until several days – sometimes even several weeks – after a purchase.
"Individual incentivisation for specific purchases was impossible to the point where rewards was kind of an abstract notion, something folks would look at every few weeks, maybe just every few months on their statement; but they wouldn't really think about it day to day. It wasn't fundamentally changing their relationship with the bank for the better."
There has been a shift within banks to leverage big data and mobile payments. In the context of loyalty schemes, there's plenty of competition in the form of merchant-specific mobile applications (such as Starbucks) that pull customers away from using their cards. Manifold modelled the problem of how to integrate with how merchants operating their rewards, which is often a card or something that they are manually imputing. "We didn't want to simply make a blockchain version of that manual process. The bigger problem is how they manage their accounting," noted Finan.
"As small businesses many of them are using QuickBooks, many have affiliate partnerships or relationships. This gets to a much bigger problem of inter-company accounting; say they have got several branches and you are trying to manage accounts across all of them. We went back to Microsoft and said we would like to solve the inter-company account challenge. Every enterprise has this problem from big corporations to mom and pop shops."
To this end Manifold is developing a tool which can automatically import from existing accounting software onto a blockchain based record of those accounts. This provides a visual, rule-based system of shared or joint profit and loss account management scenarios, which works internally or between a large company and sub-contractors.
Referring specifically to loyalty programmes, Finan mapped out the mishmash of affiliations and authorisation systems that make for transactional molasses. "When you look at the state of rewards often what you see are in upwards of three, four or five major transactions systems whose data needs to taken into account. You have got generally some sort of processor that you are working with that tends to be a third party. You have probably got two to four systems within the bank, everything from credit and debit authorisation systems to customer resource management systems, and you might even have another system that manages how data is sent to you mobile app. And then you might even be working with a third party service provider for your rewards programme.
"If you are a large bank you probably have a relationship with a major airline, where your clients can redeem their rewards points for airline miles, but it takes six weeks and by the time you do the redemption the seats you want are gone. Maybe you have a relationship with rental cars -there's usually all kinds of affiliate relationships, but there's all kinds of friction, and so the experience tends to be bad."
Finan said the Manifold Liquidity Platform aims to become the fabric to stitch together all of those accounts redemptions and do it instantly. "We like to think of rewards as a much more liquid asset, that can be exchanged freely by the client once this system is in place; rewards in this case is just a transfer of value.
"Once you have those relationships in place you can do things like exchange value cross border, assuming you have got the requisite data stored in the blockchain about your client to be able to answer KYC/AML rules, which is relatively easy to add to the blockchain because it's such an extensible technology.
"Now all of a sudden you are transferring rewards across borders and synchronising accounts across borders with your regional partners. That's basically a remittance."
The immutability and auditability of the blockchain is front and centre: Finan said the prototype Manifold is developing with Royal Bank of Canada, for instance, allows the blockchain accounts system to change state by performing the mirror opposite of a transaction.
"So the record actually shows two transactions - one for plus $100 and one for minus $100 – and you get inherent security, a trusted kernel. You can trust the core of the system without layering on all these other security controls after the fact."