Like others in the financial services industry, credit card giants including MasterCard, Visa and American Express have been experimenting with such blockchain-powered services as rewards programs and business-to-business transactions.

But recent patent filings suggest their experimentation may be moving closer to the heart of the transaction networks that power the more than 2.1 billion credit cards issued worldwide.

On July 17, MasterCard received a U.S. patent to manage “fractional reserves of blockchain currency” and essentially link cryptocurrency and fiat currency accounts. A few days earlier, the U.S. Patent Office revealed an American Express patent application for a blockchain-based proof of payment system that could “verify an earlier payment using a blockchain-based system.” The filing cites scenarios in which a purchase is made well in advance of the delivery of a service, such as concert tickets and travel.

There is competition from a wide range of companies seeking to disrupt the broader payments ecosystem.

Although an American Express spokesperson says the company doesn’t discuss the details of patent filings, it and other companies in the space have moved forward with several other publicly disclosed experiments in recent months.

“We believe [blockchain] has the potential to help us deliver new, innovative products and services, as well as transform existing business processes and applications,” Aimee Cardwell, vice president of American Express’ technology division, tells ThirtyK.

Present-Day Experiments

While patents represent potential products that may or may not ultimately be put into place, each of the three largest credit card networks have moved into real-world tests in parts of their businesses.

Visa continues testing its B2B Connect business payments service, which uses technology developed in partnership with enterprise blockchain developer Chain to simplify international business transactions. First announced in 2016, B2B Connect began testing cross-border bank-to-bank payments with partners in the U.S., South Korea, the Philippines and Singapore late last year. Visa anticipates a commercial launch of the service this year.

American Express is working with Ripple and a U.K. bank partner on a similar blockchain-powered international payments channel, “which we believe has the potential to expand substantially over time,” according to Cardwell. It has also introduced blockchain to its membership loyalty program, using Hyperledger’s Fabric framework “to allow merchants to create tailored offers involving Membership Rewards points on their own platforms, with the goal of deepening engagement and rewarding customers,” Cardwell adds.

In addition to working with technology providers such as Chain and Ripple, traditional companies are joining broader industry partnerships for their blockchain efforts. American Express participates in the Hyperledger consortium, while MasterCard is involved with the Enterprise Ethereum Alliance, and Discover Financial Services joined the Chamber of Digital Commerce earlier this year.

MasterCard has focused publicly on working with its own network of developers and partners on experimental application programming interfaces focused on proof of provenance and cross-border payments. But it also has filed patents for a flurry of other blockchain technologies this year, including ones enabling anonymous transactions, coupon authentication, a travel itinerary bidding system and, most intriguing, a point-of-sale system to retrieve payment credentials over a publicly accessible blockchain “without the use of a traditional payment instrument.”

Citing the present-day dangers of information theft, the patent filing states that “the use of a third-party data source enables an individual to transact safely without concern for their payment credentials being skimmed from their payment instrument, or without having to even carry a payment instrument entirely.” If that sounds like a blockchain-powered replacement for a physical credit card, that’s probably because it is.

Disruption From All Corners

Today, the closest thing to a crypto-powered card are offerings by companies such as Bitpay and Shift, which essentially allow users to back crypto out of their wallets and purchase prepaid fiat-denominated debit cards that operate using one of the existing payment networks.

But as credit card companies experiment, they, like other traditional financial institutions, continue to face competition from a wide range of companies seeking to disrupt the broader payments ecosystem.

Well-known challengers such as PayPal and Square predate the current blockchain boom, although both have more recently embraced cryptocurrency transactions. A host of newer companies are exploring ways to bypass existing payment networks altogether by creating their own token-based networks and systems.

As just one example, Mycelium envisions a completely independent point-of-sale system driven by the blockchain and smart cards connected to mobile wallets. EOS backers repeatedly have used the Visa transaction network as a yardstick against which to measure the speed of its blockchain. Well-publicized outages of both the Visa and MasterCard networks in July have given blockchain backers new ammunition in the charge to disrupt existing systems.

Bitcoin (BTC) “has never had a service interruption,” stated one tweet following the MasterCard crash.

Mark Toner
Mark Toner is a Washington, D.C., writer and editor. He has covered business, technology, media, education, and healthcare for a wide range of trade and industry publications.