Personal Finance

Can Blockchain Help Loyalty Programs?

By Michael Scott

Over the years, loyalty programs have become an integral part of our consumer economy. From bonus airline miles to retail points, incentives drive traffic to businesses while providing savings to users.

The growth however in the popularity and number of these programs has often created a nightmarish scenario for users, as they seek to keep tabs on their reward earnings. Many accrued rewards often go unused or unclaimed. In the meantime, businesses often face the ire of frustrated loyalty members who find the reward process complex and confusing.

A 2015 loyalty census report released by Colloquy, a global research firm for loyalty professionals, found that Americans are signing up for loyalty programs in droves, with memberships having jumped 25.5 percent to 3.3 billion between 2012 and 2014.

This same report found:

  • While a typical U.S. household is enrolled in 19 to 29 different loyalty programs, it only actively uses 5 to 12 of them.

  • Active use of these programs has steadily declined since 2010 at a rate of 2 to 3 percent per year.

  • Over 50 percent of accumulated points, with an estimated worth of $50 billion, are never redeemed. Unclaimed rewards create huge financial liability to a company’s balance sheet.

  • According to a study by London-based loyalty firm Collinson Latitude, 78 percent of consumers indicated that they would like a system that allows them to redeem their rewards more easily.

Enter the Blockchain

In an attempt to break through the logjam of concerns noted above, a company called Chain of Points is curating a groundbreaking blockchain-based platform to fuel a more efficient loyalty program ecosystem. This Toronto-based startup seeks to revive interest in the loyalty and gift card space through a new digital currency called Points.

The design of the system will enable the transfer, redemption and tracking of loyalty rewards between merchants and customers. These points have the effect of cultivating a liquid marketplace between merchants and customers, customers and one another and even between merchants.

Pivotal to the success of loyalty programs is the active participation of small and medium businesses. Unfortunately these merchants often have neither the time nor money to invest in a loyalty system. Integrating with a point of sale program can be extremely costly and requires a complex setup with the other systems. Chain of Points endeavors to assist business owners in setting up a program through easy-to-use-technology and at a low-cost price point.

“We are unlocking the power of blockchain technology to create a revolution around loyalty rewards programs,” said Irene Katzela, CEO of Chain Points. “This is a multi-million dollar industry with statistics showing that consumer enrollment is increasing. However, participation is really declining so there is a problem and an imbalance. Chain of Points is addressing that imbalance through the use of our own blockchain platform. Our goal is to make the system efficient, scalable and as fast as possible.”

Katzela noted that these businesses often have neither the time nor the funds to create loyalty programs to reward their own customers. The goal of Chains of Points, she said, is to become an inexpensive solution for the merchants, providing them with statistics and analytics and anything else they need for an efficiently run program.

She said that loyalty reward members are increasingly frustrated with using, tracking, redeeming and combining reward program points.

“We’re looking at a one button solution to all of their most common problems,” she said. “The main key here is that the system has to be useful and secure.”

Ending user frustration was the main motivation behind creating Chain of Points.

“When people sign up for different rewards programs, they often don’t use them because they’re such a big hassle,” said Katzela. “We want to simplify their experience by providing them with one single ID that allows them to see what programs you are subscribed to and use them without having to wait for a card.”

For Katzela, pairing the technology and the loyalty industry is a match made in heaven.

“I’m very passionate about the blockchain technologies and the opportunities they provide,” she said. “They are a perfect match for a loyalty industry that in my view is ready for a makeover. We simply want to make thing better, easier and more efficient for both merchants and consumers, a vision we’re getting closer to every single day. I find that exciting.”

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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