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A Proof-of-Payment System Built on Blockchain

How American Express Aims to Keep You Safe: A Proof-of-Payment System Built on Blockchain

Recently, American Express filed a patent application with the U.S. Patent and Trademark Office for a proof-of-purchase system powered by blockchain technology. One of the heaviest hitters in the financial services industry embracing blockchain would seem a ringing endorsement of the emerging technology, but what exactly is blockchain, and how can it make your transactions more secure?

Blockchain-Powered Proof of Purchase

In the patent, American Express (Amex) notes that there are currently a few ways to prove that a transaction has taken place. The typical proof is a receipt or ticket.

According to Amex, their blockchain solution is a vast improvement over current systems because it will keep a clean record of:

  • Transaction data
  • Contract data
  • Proof-of-purchase data
  • Identification data

The blockchain solution would offer a nearly irrefutable layer of proof for any transaction occurring on their network, providing, among other pieces of data, a transaction amount and a merchant identifier.

What Is Blockchain & How Does It Work?

Digital currencies have moved into the mainstream in recent years. Currencies such as Bitcoin, Litecoin, and Ethereum appeal to individuals who want to rely less on banks and to those who want more privacy. These currencies also appeal to industrious spectators, known as “currency miners,” who use specialized hardware to unlock more of the currency, like Bitcoin – an activity known as Bitcoin mining. Bitcoin mining is so popular, in fact, that the activity has created a shortage in graphics cards, driving prices up.

But blockchain is the innovation that enables this technology. Blockchain allows many computers to access a record, known as a digital ledger, at once. But those computers cannot edit the ledger, they can only view it. Furthermore, each piece of data within the ledger has only one owner. Put another way, the ledger is distributed widely, but it can only be changed under special circumstances.

Imagine that the ledger was an enormous spreadsheet and that the spreadsheet is shared among thousands of computers. At regular intervals, the spreadsheet is updated, and all computers receive the update. If there are any discrepancies, the entire network knows about it right away. The power of blockchain, then, lies in its visibility. The ledger is public and it’s easily verifiable. What’s more, since the ledger doesn’t exist in any one place, it’s very difficult to hack into.

The ledger consists of blocks. One block is a transaction. Together, these blocks form a chain.

Unpacking the New PoP System

The new system will automate the proof-of-purchase (PoP) process by encrypting certain information, such as the transaction amount and the merchant identity. This process generates a public key, and that key is placed on the blockchain. Authorized users can retrieve the data by decrypting it with an approved smart device. The smart device – presumably using an app designed for the purpose – would decrypt the data and match it to the appropriate customer.

The data is protected from corruption because it exists in many locations on the chain, but at the same time, it would be very difficult for unauthorized individuals to access it because of the encryption.

Amex suggested several use cases in the patent, including:

  • Ticketless access to venues
  • Unlocking a hotel door without handling keycards or touching keypads
  • Granting authorized users access to shared-economy items such as cars or bicycles

Amex has also partnered with blockchain innovator Ripple on a payment system that would leverage the power and security of blockchain technology.

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