CBS News Sunday Morning had a segment today called, “Card games: Getting to the point with travel rewards.”

As you correctly guessed, it focused on the primary benefit that makes airline credit cards appealing — miles that can eventually be used for free travel.

The cardholder at the center of the story said that he and his wife had about 40 cards and had traveled the world with their 6 kids thanks to all the miles they rack up. Not exactly what I would describe as your average consumer.

That aside, Brian Kelly, also known as The Points Guy, that got my attention. He said, “You are literally throwing money away if you’re not getting miles and points.”

This blog post is not an endorsement or a criticism of anyone or of airline credit cards. Personally, I don’t have one. I kind of feel sheepish admitting that. I don’t have a reason other than I’ve never applied for one. Maybe I should stop just smiling and saying, “No thanks,” to those enthusiastic young people at airport gates offering cards.

What I really find interesting in all of this is the business model.

Not just for the banks, of course, but for the airlines, too. Airlines love these cards maybe more than the consumers who use them.

How can that be, you ask? Wouldn’t they be worried about losing money on all those free flights people will take?

No, not at all.

The reality is, as Bloomberg reported recently, airlines sell miles to banks so banks can use them to entice new customers to spend more and more on the cards.

In many ways, the Big Three U.S. airlines have organized themselves into two distinct businesses. There’s the traditional activity — the one with jets — which involves pricing seats for as much as possible, collecting a bag fee, and selling some food and drinks while keeping a close eye on costs. The other business is the sale of miles — mostly to the big banks, but also to companies that range from car rental firms to hotels to magazine peddlers.

Banks love them, too.

For the banks, people who pay annual fees for those cards to accumulate miles are the closest thing to a sure bet. These consumers typically have higher-than-average incomes and spend more on their cards, which generates merchant fees for the banks. They also tend to maintain high credit scores, which means they pay their bills on time and banks experience fewer defaults.

Everyone’s a winner.

Have you noticed it, too? The buzz about blockchain technology seems to be getting louder and louder.

The Harvard Business Review has published numerous pieces recently from many different contributors with perspectives on what blockchain technology could mean for sector as diverse as healthcare and entertainment, to utilities and global supply chains.

It’s a lot to take in, and there’s a lot going on “under the hood” from a technical perspective.

Jeremy Rubin, Technical Director of the MIT Bitcoin Project, distilled it into terms that even I could begin to understand in his 2014 TEDxBeaconStreet talk, “What the #?!* is Bitcoin?”

What I’ve concluded so far in all of this is this. At the heart of blockchain, it seems, is trust.

Trust that may someday not require third party arbiters like banks, lawyers, and other traditional institutions that control the flow of information, identity, and value.

As Joichi Ito, Neha Narula, and Robleh Ali wrote recently in their March 8th HBR article, “The Blockchain Will Do to the Financial System What the Internet Did to Media”…

“…transactions must satisfy certain rules before they can be accepted into the Bitcoin blockchain. Instead of writing rules and appointing a regulator to monitor for breaches, which is how the current financial system works, Bitcoin’s code sets the rules and the network checks for compliance.”

Changes like this are always so interesting and exciting to me. Those of us who remember the early days of the Internet — and some of the voices who dismissed it so easily — might now find ourselves looking at cryptocurrency and smart contracts as signs pointing the way to a future that is only beginning to come into view.

What do you think?

Are you using Bitcoin, or one the 700+ (yes, that’s seven hundred plus!) cryptocurrencies Rajesh Dhuddu talked about as part of his Hyderabad TedX Talk in January?

Share your thoughts in the Comments.

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by Greg Russak, VP Sales & Marketing for ExpenseAnywhere

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