Ai Editorial: Leveraging blockchain for fostering loyalty

First Published, 23^rd March 2016

Ai Editorial: Travellers want their points right away, and they want more redemption options. How can blockchain technology play its part, Ai’s Ritesh Gupta finds out  

There are several challenges that continue to impede the lure of FFPs.

One of them is how quickly do I earn when I spend? Can it be real-time? For merchants, it is imperative to plan their liability management, i. e. how to reduce, allocate, share, track, or liquidate rewards liability.

Interestingly, tradable, blockchain-based loyalty tokens promise to combat such hurdles.

As a blockchain technology specialist, Ribbit.me, intends to lend a new dimension to loyalty.    

“People want their points right away, and they want more redemption options,” says Sean Dennis, Co-Founder and COO, Ribbit.me.

So what disappoints Dennis when it comes to loyalty programs? “…complications and inefficiencies associated with the loyalty programs. The lack of innovation and options as a client. It all feels rather bulky and outdated,” pointed out Dennis.

In one of his blog posts, Dennis pointed out that Millennials can be very loyal, they “just want points that are applicable to them and their needs. They want easier to earn and redeem and a broader range of redemption options.”

RApp or Rewards Application

For its part, the company has come up with its offering, the LoyaltyPlatform.

As Dennis explains, program operators are able to leverage blockchain and smart contract technology in order to:

- Either create or make far better, their redemption networks (reduction in friction for inter operator    redemption),
- Manage program liabilities, and
- Offer dynamic issuance and redemption options to their customers via SmartRewards

Referring to the concept of the Token Tree, Dennis explained: Operators of a network are able to create a Rewards Application (RApp) with set rules and parameters. Below this, every partner operator in the program is able to create a Sub Rewards Application (Sub RApp) that must follow the rules and parameters set by the RApp above. These rules may cascade from top to bottom, creating the uniformity of a coalition program, but with the benefit of being able to individually brand, issue and redeem every Sub RApp. “Imagine if the airline coalition groups decide to utilize this feature and individually brand the partner operators, whilst still being under the Coalition rewards program,” said Dennis.

The company has partnered with a number of the largest financial, advisory and banking technology providers to approach operators and provide them with a platform that meets their individual needs.

The feeling of “being valued”

The company’s platform makes it so easy to include redemption partners in a program, without the high cost of implementation.

“The underlying blockchain and smart contract technology allows for speedier issuance, giving the consumer higher perceived utility and a feeling of being valued,” asserted Dennis.

“As a customer, I often feel undervalued in loyalty programs. Examples include the `event-type’ reduction in the value of points that I have already earned, in order to limit the operator's liability,” he said. 

Through using the LoyaltyNetwork, operators are able to actually target levels of breakage and reduce redemption variance risk. Breakage can be embedded into the rewards point. The operators within the redemption network are also able to share the liability in a frictionless manor between the issuing and redeeming partners at an agreed upon rate.

Benefits

With this emerging technology, reward points are going to generated by an algorithm and issued in the form of a digital token on the blockchain.

So what sort of impact is going to be there on the profitability of an airline’s loyalty program?

From a B2B business perspective, Dennis says the company clearly provides a platform for these operators to function in a far more efficient environment with regards to their loyalty offering.

Operators may benefit from liability and network redemption management tools, better targeting of their customers through dynamic issuance, resulting in more sales and last but not least, lower loyalty program operation costs. This way one also ends up adding effective liability management tools including targeted breakage outcomes.

Also, there would be zero lag in reward redemption with blockchain technology. “Because all partners in a redemption network share a secure platform, the rewards can be transferred instantly between clients as needed. Think of the blockchain as the Internet of value,” shared Dennis.

Investment – if any?

As for what sort of preparation is required, Dennis says integration with the platform is relatively simple, and legacy system integration with operators (which is most likely with existing large operators) is easy and “we will work with large operators like airlines and hotels to customize as needed”.

“The smaller operators in the industry are likely to choose something more of a “plug and play” option when it comes to their Rewards Application,” said Dennis. “The larger operators will develop their own highly customizable Rewards Application (most of which they already have in terms of parameters or desired outcomes).”

Blockchain as a technology

Payment specialists point out that blockchain has a way to go before a critical infrastructure like one for payments should be built on it.

Dennis agreed on this, and said payments and settlement are areas that are being highly focused on for blockchain application. But for large operators, there is a way to go before adoption due to hurdles and regulations that need to be overcome. This is a major reason why the loyalty industry is the perfect application, he said. “The payments industry has undergone constant innovation, while the loyalty industry has remained fairly stagnant, and is built on a system that no longer satisfies the consumer, and is inefficient for the operators to run. Our technology stack using blockchain (Distributed Ledger) and Smart Contracts addresses this need,” he said.

Learn more about the latest developments in the arena of blockchain technology at the upcoming 10th Annual Airline & Travel Payments Summit, scheduled to place in Barcelona, Spain (26-27 April, 2016)

For more information, click here

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