Loyalty programs have widely increased across economic sectors such as financial services, retail, and travel. According to the 2015 Colloquy Loyalty Census, the average household of U.S. takes part in averagely 29 different locality programs. The outcome is a network of redemption options and point systems, with cumbersome procedures for exchanging points among partners. The programs are actually suitable for some sort of disruptive invention that would make them simpler to utilize.
Blockchain: How It Works
Blockchain is actually the best known tech behind bitcoin. Essentially, it makes it easier for a ledger of business deals to be shared via a network of participants. When a new digital business deal occurs (for instance a loyalty point is exchanged, redeemed, or issued), a distinctive algorithm-made token is generated and assigned to that business deal. Usually, tokens are categorized into blocks and distributed across the network of participants, updating every single ledger at the same time. Newer business deals are validated, categorized (for instance, every 10 minutes), and linked to the older ones. This in turn creates a verifiable, secure, and strong record of all transactions. The good thing is that it does not require any centralized databases or intermediaries.
For users that are juggling a variety of loyalty programs, this bitcoin technology could serve with instant exchange and redemption for multiple loyalty currencies on the same platform. The good thing with relying on one “cryptocurrency wallet” for loyalty points is that users would not be forced to search for each program’s redemption rules, limitation, and options.
All loyalty programs are actually susceptible to blockchain’s revolution. However, the travel industry is somewhat the most at risk. Essentially, this sort of loyalty programs seems to be multicurrency and complex, rendering them diverse for retailers, which normally operate simple discount programs, or from banks, which typically offer a single currency or cash back that can be used easily across an array of merchants. In some other circumstances, travel loyalty programs vary by journey element (dining, hotel, car rental, flight), resulting to fragmented point collections. Keeping in mind the fact that estimates vary extensively, we estimate that the classic “breakage” rate is averagely ten to twenty percent. Also, it can be challenging for the average person to collect enough points to earn them a meaningful reward.
The Benefits Of Disruption
Many industries have undergone disruption, as a result of techs that successfully reduced frictions and inefficiencies, most of the times dis-intermediating developed players in the whole process. Large travel companies such as hotel chains and airlines know this from painful experience. They pay a lot of money every single year to OTAs (online travel agencies) such as Expedia and Priceline, which have changed the way customers book rental cars, hotels, and flights. Blockchain-based loyalty platform is somewhat another suchlike disruption.
Both large scale and startup technology companies are seeing the leeway this presents, and most of them are actually teaming up. Loyyal for instance, is partnering with IBM to generate an infrastructure for rewards and loyalty programs. Travel companies that have loyalty programs, whether part of the larger alliance or stand-alone, will have to work out on how to respond.
The good thing is that early adopters benefit a lot. The first blockchain can help eliminate a large balance sheet liability that most companies in the industry are currently facing. The programs have for long relied on partnerships and cobranded cards to generate incremental revenue or sell points. However, the number of hotel rooms and airline seats available for redemption in the past few years has been limited by numerous factors and near-record occupancy. The outcome has typically been a growing volume of unredeemed points with which new record keeping standards have become perplexing. Revenue attributable to the actual price of loyalty points should be submitted until when the miles get redeemed.
Switching to blockchain would make it easier for companies to quickly maintain and add loyalty partnerships without developing any sort of complexity to their existing programs. What’s more, a robust & frictionless network would mean numerous redemption options surrounding the travel product industry, hence generating the much-needed release valve for the steadily growing balance sheet pressures. It will additionally allow businesses to effectively break out of the hectic loyalty program mold of narrowly defined programs and redemption procedures filled with consumer hassles.