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In cases such as large airlines, who have hundreds of partners, the process of earning, redeeming and reconciling mileage points can be incredibly complex. Smart contract-driven efficiency means more profitable partner programs and a better customer experience. It applies rules on transactions in real time, converts into points and updates. These points-based treasury operations could be made autonomous with smart contracts. Smart contracts are self-executing contractual states stored on a blockchain, which nobody owns and everybody trusts.

A loyalty program user usually cannot go to the loyalty program and ask to redeem points for fiat money or hard currencies. Instead, once the money is spent and points are earned, they are locked into that loyalty system. If a user cannot use those points for any reason, the points literally hold no value. Blockchain is the technology behind Bitcoin, cryptocurrencies, and various other applications that work off of decentralized networks. Blockchain enables a ledger of transactions to be shared across a network of participants. When a new transaction occurs , a unique token is created and assigned to that transaction.

What is Blockchain and How Does it Apply to a Loyalty Program?

Customers love reward points or redeemable loyalty points as they deliver great value to them. Companies maintain loyalty systems and give out reward points to understand customer behavior better and to keep them on board. Companies who have developed great loyalty programs have better customer following and market capitalization. Loyalty programs are industry agnostic how to program blockchain – be it Retail, Banking, Consumer Goods, Travel, Hospitality, Telecom, Aviation or E-commerce. Research by Markets and Markets indicate that this market is expected to grow by 173% from 2016 to 2021 and touch $4.59 billion. Crypto-linking or card-linked rewards (as discounts or cash-back rewards) can offer users an easy entry into investing in this digital currency.

Companies are now exploring how blockchain-based loyalty programs can meet consumer needs. In situations where loyalty programs incorporate multiple brands, there can be a reluctance for some companies to share personal information and fears over losing control over data. Finally, as with other blockchain applications, scalability can be a challenge. The greater value addition would be the open nature of the system for all the stakeholders – consumers, merchants, companies, loyalty program owners and system managers. This DLT based solution cuts out the redundant operations and helps lower operating costs.

Etihad Guest and Loylogic’s Virtual Reward Card gives program members another reason to spend miles in store and online

He has lead global eCommerce solutions for organizations like Volvo-Eicher Ferrari and Guggenheim Partners. Chris is a Senior Executive for BigCommerce; CPG merchant, keynote speaker, father and songwriter. NFTs are often used to represent items such as art, collectibles, and virtual worlds. Some of the companies that are using Loyyal include Emirates Airline, AccorHotels, and the City of Dubai.

Even airlines are experimenting with cryptocurrency as a loyalty reward. When Northern Pacific Airlines launches, the carrier will reward frequent https://globalcloudteam.com/ flyers with its flyCoin token. It is also exploring partnerships with major crypto exchanges to allow users to buy additional coins.

Canadian Tire enhances Triangle Rewards with subscription program Triangle Select

If the token supply grows slower than the cashback pool the cashback value per token increases. Users who already hold tokens are incentivised to spend more, to maximise the use of their tokens. By spending more, they increase the amount of the cashback pool and the cashback value per token. A higher value of the cashback per token again incentivises to spend more. This creates a positive feedback loop there drives more sales for the company.

• One of the main aspects of blockchain is its steadfast security and transparency offered to consumers conducting transactions online.
• Most traditional loyalty programs don’t give their most loyal customers the freedom to do what they please with their earned value.
• Owners will be able to use their rewards to purchase goods and services from BMW as well as from a linked ecosystem in the future.
• A blockchain is a digital ledger that can be maintained on multiple systems and added to by participants.
• A customer’s tier and status in the ecosystem will be determined by the loyalty rewards they have acquired via various actions.
• Because the blockchain is a public ledger, all transactions are transparent.

Users get rewards in the form of tokens, and merchants can choose which tokens to distribute as rewards. Furthermore, the data captured from transacting with the token in the loyalty program can be used to inform marketing decisions and track, or encourage, engagement with sponsors and provide provable attribution for them. And, speaking of sponsors, there is a niche for their content and products to be rewarded and bought with the blockchain fan tokens through the loyalty platform. Having this quantifiable engagement is also attractive to sponsors when looking at where to spend their budget, while the token economy can be monetized by the team.

Our approach – tokenization as a way forward

For example, restaurants can contribute to the cashback pool only on a slow day or a coffee shop can give a higher contribution when buying a second coffee. Lower cost of accounting, as all transactions are executed by the blockchain protocol and stored on the blockchain. Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3.

In 2022 there will still be a significant increase in consumer adoption, which is leading to businesses making moves and accepting cryptocurrencies as a form of payment and including crypto in their rewards programs. At the end of the day, the most valuable digital currencies anyone can earn allow them to build value over time. Because cryptocurrency and crypto wallets are decentralized, the value of those tokens can fluctuate with market demand.

Blockchain Fan Tokens for the Fan Loyalty Program

To retain customers, loyalty programs are being launched that focus heavily on personalization and take into account the huge move toward online shopping. Having more flexible reward programs lets customers earn points for gas, groceries and shopping online or through mobile apps. While this is only one example, companies across the board are adapting to a new normal and pushing forward with innovative ways to serve their customers. Customer loyalty programs offer direct financial benefits to companies, and also better customer information for strategic decision-making.