How The Loyalty Market Will Look After The Impact of Blockchain
Cryptocurrency and Bitcoin value has surged significantly over the past year, with many experts branding it ‘digital gold’, and for good reason.
This has prompted thousands of leading e-commerce organisations to transfer their business processes onto the blockchain, and justifies why 500 merchants have invested in GIFTD solutions. It’s clear that this enhanced attention is accentuating the so-called digital revolution.
When a new digital transaction occurs (for example, a loyalty point is issued, redeemed, or exchanged), a unique algorithm-generated token is created and assigned to that transaction. Tokens are grouped into blocks (for example, every 10 minutes) and distributed across the network, updating every ledger at once. New transaction blocks are validated and linked to older blocks, creating a strong, secure, and verifiable record of all transactions, without the need for intermediaries or centralized databases.
The nature of the technology lends itself perfectly to retail loyalty, enabling rewards to be received from and transacted among several merchants. Blockchain is being implemented amongst loyalty programmes globally, suggesting it has the scope to revolutionise the loyalty sector.
Impacts on the market
For consumers juggling an array of loyalty programs, blockchain could provide instant redemption and exchange for multiple loyalty point currencies on a single platform. With only one “wallet” for points, it saves consumers having to hunt for each program’s options, limitations, and redemption rules.
As well as simplifying the rewards process for consumers, blockchain provides effective solutions for merchants through Smart contracts. Smart contracts are executed automatically upon the meeting of a number of conditions and triggers without the need to enforce the execution. Blockchain, therefore, will simplify implementation, administration and support of reward programs, allow to reduce costs and improve transparency and reactiveness. Moreover, new blockchain rewards and loyalty programs will allow simple integration with current programs using smart contracts.
Safer — Information held on a blockchain exists as a shared — and continually reconciled — database. This is a way of using the network that has obvious benefits.
A blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet, meaning no centralized version of this information exists for a hacker to corrupt. This makes implementing blockchain technology highly advantageous in a digitized age whereby hackers thrive (note Ubers recent data exploitation scandal).
Potential Disruption — Blockchain is likely to transform various loyalty programmes, but perhaps the sector hit most by its impact will be travel based reward schemes.
Travel loyalty programmes tend to be complex and multicurrency, differing by each journey component (flight, car, hotel) leading to fragmented point collections. In addition, travel organizations pay billions in commissions to online travel agencies (OTAs), so blockchain-based loyalty schemes could throw another spanner in the works. However, this presents a new opportunity for technology companies to exploit.
Partnerships — Due to the diverse nature of the technology and the notion that it relies on widespread adoption, we could see a major influx of companies teaming up to implement blockchain programmes for their customers.
The redemption of Bitcoins is only available with the products and merchants that have bought into the concept, meaning widespread adoption is key to blockchain’s growth. This is likely to be in the shape of smaller start-up loyalty programmes reaching out to larger ones to expand their reach and develop key leads within the marketplace.
Each loyalty programme would be anchored by a major airline, hotel chain, technology expert and network providers such as banks or payment card processors. Ultimately, the rising popularity of blockchain suggests many sectors will have to evolve and adapt, and forming joint ventures is likely to be a key factor.
More Consumer Control — Blockchain relies heavily on customer data to facilitate the personalized and specialised rewards system.
Due to new GDPR laws, customers can hold all their data on the blockchain, have enhanced control over who accesses and uses that data and have the power to remove it, completely at their own discretion.
For example, a customer might join the blockchain program, transact with different retailers and have all that product data stored within their account. They can then choose to receive certain offers and gain cryptocurrency ‘bonuses’ as a result, however they don’t have to receive any promotional material at all. This allows customers to utilize their power through effectively selling their data to the companies they want to, rather than the data being purely exploited by those brands.
All in all, blockchain based loyalty programmes create a win-win for retailers and their customers. Through positioning consumers as self-governing individuals who decide whether to spend or save a loyalty token with real monetary value will enhance blockchain’s appeal for the public, and the fact merchant’s revenue increases by 17% on average per month as a result is a major lure for retailers. Therefore, widespread adoption is likely and the profuse impact the system will have on the loyalty sector is unparalleled — there’s no doubt blockchain should be viewed as an exciting proposition by customers and businesses alike.