How Blockchain Can Repurpose Trillions In Unused Loyalty Points


oyalty rewards customers are sitting on a potential gold mine. Customers have accumulated 48 trillion in unspent loyalty points, according to one estimate. Airline rewards program members alone have roughly 30 trillion unspent miles in their frequent flyer accounts, in no small part because redeeming them is still cumbersome.

Thankfully, with the introduction and proliferation of blockchain technology, unlocking these points will become easier and quicker to do than ever.

Paired with an existing rewards program, blockchain has the potential to transform points sitting dormant in customer accounts into a more flexible currency that could be spent on a far wider universe of products.

In doing so, technology can create a new type of allegiance to a brand, as well as help an enterprise with that most essential of tasks such as pursuing a more purpose-driven approach to its business that benefits multiple stakeholders throughout its network.

Loyalty programs date back to American Airlines’ launch of the first frequent flyer program in 1981.

Holiday Inn brought the concept to the hospitality industry in 1983 and National to car rentals in 1987.

These days businesses ranging from your local barbers to your florist use reward programs.

They are valuable because they not only build brand loyalty but can also, at times, drive revenues from third parties seeking to buy a mailing list or piggyback on a brand’s success.

Yet over time customers have found that it’s easier to earn points than to spend them.

Globally, airlines have roughly 288 million active users who earn around 3.5 trillion points per year.

Based on the 30 trillion or so unspent miles collectively sitting in customer accounts, the average member has points over £400.

In other words, people are racking up great stores of loyalty points, but struggle to redeem them. The risk for any business is a program created to build good feelings about a brand that, over time, breeds resentment if people lack meaningful ways to cash in what they’ve worked hard to build.

Blockchain, coupled with other innovative technologies, can deliver a new level of sophistication to exiting rewards programs.

Think of blockchain as a sharable, immutable ledger that is perfect for tracking assets, whether cash, inventory or loyalty points.

Network participants have access to this digital ledger; a transparent, secure system that can’t be changed without leaving digital fingerprints. In a world where trust and transparency are paramount, blockchain can deliver both.

Blockchain makes it possible to unify the rewards experience across industries and companies, thereby transforming a product-centric system into a purpose-centric one.

If the idea of a rewards program is to reward loyal customers, any business running one needs to at least consider embracing this technology that converts miles into a more tangible currency.

A customer wouldn’t have to use Avios air miles, to use one example, to secure a seat on a British Example flight or use miles with a limited universe of Avios partners.

A monetary value can be assigned to each point, between 1 and 2 pence a mile, say, allowing loyalty members to spend them with any merchant agreeing to accept them.

Hotel points could be used with a ride-hailing app, for instance, or with an online shop that is happy to welcome a new customer. For enterprises, this creates several opportunities.

In addition to offering customers better brand experiences, it helps curate ecosystems of partners and vendors that can create shared value, thus resulting in growth and business opportunities across the value chain.

However, it is worth noting a bit of patience is required for those expecting an immediate payoff.

Though blockchain has been around for longer than a decade, it’s still a few years away from widespread use, according to Gartner.

Blockchain is “appearing in experimental and small-scope projects,” the research firm wrote in its annual tech trends article, released in October 2019, and “will be fully scalable by 2023.”

Though still a promising technology, blockchain is gaining traction in a wide range of industries from finance to health care and life sciences to the public sector.

The technology is maturing and increasingly being accepted by key decision-makers.

With blockchain, customers could integrate disparate programs into an interlinked loyalty network, allowing them to earn and burn points across organizations.

To date, the concept of blockchain-enabled loyalty systems has started to be embraced through tokenization.

With this, points are turned into loyalty coins that can be spent at any online site choosing to accept them.

Blockchain would simplify the complexity of multi-variable agreements between several parties. “Smart” contracts – contracts that not just codify an agreement but automatically execute elements of it – are also enabled by blockchain and would allow loyalty programs to flourish without much in additional costs.

However, there are still stumbling blocks to widen the further usage of blockchain. For instance, governance structures need to be decided and incentive models established.

There needs to be a shift in mindset from the centralisation of today’s programs to the decentralisation intrinsic to any blockchain-enabled solution.

Maybe the biggest hurdle of all will be this idea of pooling points across platforms. Loyalty programs, after all, were created so enterprises could hold customers close.

Yet the true worth of any loyalty program is happier, more engaged customers – even if it means points with other partners.

It may be counter-intuitive, but the world’s most powerful brands recognise the purpose-driven approach allows them to stand out from their competitors – and blockchain, paired with an existing rewards program, is a way of delivering a more meaningful and positive customer experience.

In the short run, a few bold enterprises must serve as the anchors that draw others into an ecosystem of shared value.

It’s essential the lead participants put the ecosystem ahead of any individual company or industry to arrive at a purpose-driven approach rather than a product-centric one.

Because these kinds of changes require a paradigm shift, it will be driven by some combination of the CEO, CMO, CTO, and CIO who champion the next generation of loyalty programs.

Today, this is an aspirational idea as it means shifting from a focus on limits and cost-cutting to innovation and abundance.

And yet, progressive companies are willing to embrace these bold strategies. For instance, American Express is using blockchain to let retailers tie AmEx reward points to its own products.

American Express’s first partner is wholesaler Boxed, which offered more AmEx reward points for inventory the company wanted to get off its shelves.

KrisPay, the loyalty program for Singapore Airlines, lets customers make point-of-sale transactions using a digital wallet via a register barcode.

Customer loyalty and engagement programs are a critical strategic investment for most modern-day enterprises.

Yet today’s customer loyalty programs are not realising their full potential due to issues such as low redemption rates, poor client retention, time delays, and high costs. But, with blockchain, this may all be about to change.


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