The WHY of Enterprise Branded Currencies

By Rahul Prakash, a TF Blockchain Contributor

This post is part of the TF4 learning series based on various sessions conducted as part of the TF4 TF Blockchain conference that took place in November 2019 at The Triple Door in Seattle, WA.

Thanks to panel participants, David Zhang, Jenn Lowther, Ashley Harrell, Jonathan Blanco, and moderator Rachel Wolfson

Why Would Companies or Brands Come up with their own Cryptocurrencies such like Facebook did with Libra?

We should expect enterprise currencies to go through a maturity curve. First, early adopter companies will be the ones that want to include their customers in more transactions, but are unable to do so based on current financial rails. For example, Facebook has a consumer base of ~2 billion, but many of them do not have access to US financial systems. The introduction of Libra will help Facebook include those users into Facebook's business activity, which would otherwise be unavailable. Second, companies who can utilize network effects will look to introduce enterprise currencies, accelerated by the maturity, awareness, and adoption of blockchain technology itself. If more people have cryptocurrency wallets, the adoption of enterprise coins will have a more natural uptake. These enterprise coins will help companies reach more customers and reduce friction for existing customers. Third, spurred by previous successes of enterprise currencies, more and more companies will come into this space and introduce their own cryptocurrencies.

What is the Difference Between Enterprise Currencies and Loyalty Programs?

Loyalty programs are typically a closed-loop system, meaning that the consumers can use them ONLY within the network of the company. They are not transferrable. As a currency, there will be reduced value in having a currency that is not usable outside of the business' ecosystem. Global companies with in-network currencies can bring down the cost of remittances. This will help reduce the associated friction and drive down in-house savings for internal payments.

Gift cards, on the other hand, are an open-loop system. Being able to spend an enterprise currency outside of the ecosystem would make it an open-loop system. Gift cards are transferrable, but loyalty points are tied to an account. Enterprise currencies can help companies manage one infrastructure and still provide both values for their consumers.

What are the Advantages of Enterprise Currencies to the Companies?

Tracking and monitoring: Like loyalty points, enterprise currencies provide insights into the companies by tracking consumer behavior. In a way, consumers are giving up their privacy in this scenario. With a high possibility of privacy repercussions, it is crucial for the legislature to correctly define the law around how this space uses blockchain technology.

In light of the above conversation, the following is a look at a few high profile enterprise cryptocurrency proposals:

1. Facebook led Libra

What: Simple low volatility global cryptocurrency (stablecoin) & financial infrastructure (Calibra wallet)

Stated Goal: Empower billions of people (the unbanked)

Company value: Digital cash used as a payment mechanism amongst Facebook's network participants would drive revenue for Facebook. Also, the data on financial behavior is priceless to Facebook for analytics. They can also attract the unbanked to the Facebook network if that population gets help in remittances.

2. JPMorgan Chase's JPM Coin

What: Digital coin representing a fiat currency (stablecoin backed by USD and can extend to other currencies)

Stated Goal: (1) Enabling instantaneous international transfer of payments between institutional clients (exchanging value) by reducing settlement time and reducing clients' counterparty and settlement risk. (2) Instant settlements for securities transactions. (3) JPM coin to replace dollars for JP Morgan's treasury clients.

Company value: The first-to-market advantage in providing increased value in corporate payments thereby attracting more customers

Note: This is an in-network digital currency rather than a cryptocurrency and isn't usable outside the JPMorgan network

3. Walmart digital currency via blockchain (From the patent filing)

What: Digital currency pegged to USD (they are at least not calling it cryptocurrency). It will be available anywhere and provide a fee-minimal store of wealth. In the press, it is dubbed as WalmartCoin, although the company's patent filing makes no such claim.

Stated goal: It is aiming to help low-income households where credit can be a problem. "A blockchain-based system of providing digital currency may facilitate accurately and efficiently transferring digital currency and reduce disputes among different parties."

Company value: Providing value to their network participants and attracting more customers meanwhile help with customer retention.

Rahul is a technology advisor with a deep background in enterprise IT. With a driving-need to learn, he is always exploring how technology can help make our lives better. Rahul is currently busy following the breadcrumbs down the Blockchain rabbit hole, picking up shinies along the way. Brilliant minds have an open invitation to connect @ And, have a coffee break over a scintillating conversation on Blockchain - or travel, or climbing, or diving, or Seahawks, or...


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