Mastercard testing quantum computing for loyalty and rewards

Bloomberg

The retailer loyalty market is massive — valued at about $142 billion, according to Research and Markets Global Loyalty report — creating a need for even more powerful computing to make the most of the customer data that's used to offer incentives.

"Some of these retailers have customer bases in the hundreds of thousands, with hundreds of rewards programs," said Steve Flinter, vice president of artificial intelligence and machine learning at Mastercard. "So, how do you give which reward to which customer, and at what time? It's really a hard problem to solve, even with the best technology that we have today." 

Mastercard has partnered with quantum computing company D-Wave to research how quantum computing can be used to narrow the focus of incentive marketing. Quantum computing uses quantum mechanics, or advanced physics, to solve problems faster than the computers that most companies and consumers use today. Quantum computers are designed to work with more combinations of information, and thus perform more computations in a shorter amount of time. 

By feeding data on payments, sales, redemption, demographics and hundreds of other sources of information into a quantum computer, Mastercard hopes to obtain information on how consumers and merchants engage with incentives, with a view into shopping time, payment type redemption and repeat business. That information can then make these loyalty programs more granular, and serve Mastercard's strategy to provide services for issuing banks and merchants that are beyond payment processing. The work is experimental, and there has not been a formal product release as of yet.  

"Quantum computing is an emerging technology that can be revolutionary for our industry," Flinter said. 

For its work with Mastercard, D-Wave uses what's called quantum annealing. Quantum annealing solves problems associated with tasks such as scheduling shipments, or the most efficient process for corporate tasks such as scheduling travel, routing a financial transaction or building a workflow. Other forms of quantum computing include analogue and universal, with the main differences being more complex versions yield more computing power. 

"[Annealing] is an easier technology to work with or to scale," said Alan Baratz, CEO of D-Wave, adding that other forms of quantum computing are more tailored for chemistry and other sciences. 

There are also potential uses for fraud detection, insights into internal business operations at both Mastercard and its clients, Flinter said, adding that quantum computing will work alongside other initiatives. For example, Mastercard recently debuted the Mastercard Artist Accelerator, which provides instructions for artists on how to access the metaverse to engage with their audience. Quantum computing could in theory provide more detail for individual artists that wish to use the metaverse for branding, payments or other purposes. 

"Right now we're working in our organization and with a wider group of stakeholders to figure out the right way to deploy these innovations," Flinter said. 

Women in Payments

Taking a quantum leap at IBM

March 7, 2023 11:50 AM

D-Wave is among a group of technology companies, such as IBM, Google, Amazon and Microsoft, that sell cloud-hosted quantum computing technology to enterprises.

In financial services, early uses of quantum computing include JPMorgan Chase and Ally Bank. JPMorgan Chase is exploring the technology's potential for risk and merger analysis, among other functions. In an earlier interview, IBM associate partner Mary Ann Francis said quantum computing is one of the main areas of focus for her firm's engagement with banks in the coming year.  

The number of companies that are dedicating more than 17% of their technology budgets on quantum computing will grow more than 300% over the next two years, according to IDC, and two-thirds of the companies investing in quantum computing will begin using it over the next two years. 

Visa's work in quantum computing includes research led by emerging computing specialist Kim Wagner. Visa is examining biometrics, and different potential use cases for quantum computing. It's also working toward building a scalable quantum computer (most financial institutions lease quantum computing from third parties). Visa did not provide comment for this story by deadline. 

Quantum computing can contribute to the broader trend toward speeding payment processing, according to David Mattei, a strategic advisor for Aite-Novarica. 

"I can envision a world in which all forms and types of payments become real-time," Mattei said. "In today's payments world, there are so many batch processes. Think about core banking systems that have nightly cutoffs to process all the transactions for the day and to update consumer and business account balances."

With the processing speed afforded by quantum computing, payments could become instantaneous, Mattei said. This could result in daily payroll, individualized fraud protection and customized shopping and banking, he said. 

But there are also challenges — crooks can use quantum computing to aid hacking or to figure out ways to circumvent existing protections. Mastercard's earlier work in quantum computing includes specifications designed to detect quantum-driven intrusion. 

There are also potential logistical hurdles. The National Institute of Standards and Technology is developing new algorithms that can withstand assaults from quantum computers, a process that may take several years. 

"Then the payments industry will need to implement it," Mattei said, likening the adjustment to the years-long country-by-country EMV chip card migration — only more complex and on a bigger scale. "Given the number of players in the payments ecosystem globally, including financial institutions, merchants, fintechs, crypto currencies, processors, third party providers and others, it will be a multi-year effort to replace existing technology with new quantum computing-proof cryptographic technology."