Problems of the Mileage System
What kind of issues can be found in the mileage system?
MileVerse is a mileage integration payment platform, that applies blockchain technology to build an integrated ecosystem, that benefits everyone, ranging from corporations and customers up to affiliated stores.
Mileage System
Mileage points (*hereinafter referred to as *mileage*) — first introduced through customer compensation programs by airlines, are issued by and used with credit card companies, telecommunication companies, banks, gas stations, on/offline markets, and general corporations. It is evolving from a reward program that compensates a certain amount of money after customers use a product to an alternative means of payment such as for discounts, payment, exchanges etc.
In Korea, mileage service was first introduced in the early 2000s, beginning with mileage issued in the form of stickers/coupons in the offline market, after the introduction of smartphones, with the convenience of applications and web accessibility, various providers have appeared, and the mileage service has begun to gain popularity.
Market Size
In Korea, the cumulative mileage amount of airlines and credit card companies as of 2018 exceeded about 6 trillion KRW, and for telecommunication companies, shopping malls, and other industrial groups, it is estimated to have been about 20 trillion KRW in 2019, based on data from the National Statistical Office and Korea Consumer Agency. In addition, with the development of the online shopping and e-commerce market, it is showing a growth rate of more than 20% annually, with the possibility of the expansion of the future market expected to increase.
Problems of the Mileage System
Problems from a corporate’s standpoint
The mileage service is used by corporations as a marketing method such as increasing sales and attracting customers. However, the mileage issued by a corporation to a customer is classified as a corporate debt under international accounting law, and the issued amount must be retained as an internal provision for doubtful debts.
When the validity period of mileage has elapsed, it has been institutionalized to transfer the mileage that has passed the expiration date to a social foundation, as a result, the mileage issued by the corporation may be issued in a situation where it is not profitable to the corporation, thereby promoting the usage of mileage.
The issues that are faced by corporates include but not limited to:
- Difficulty in asset management due to corporate debt
- Difficulty in securing many corporations due to 1:1 mileage exchange request
- Failure to secure various affliated stores
- Increase in incidental costs for mileage consumption
Problems from the customer’s standpoint
In the case of customers, they want to use the mileage they have acquired as cash without various restrictions such as restriction of validity period, restriction of minimum usable amount, and use of total amount, but in most corporations, only using it at each corporation’s affiliates, having a minimum usage amount, etc. it is a reality that the usage of meliage is restrictive.
The issues that are faced by customers include but not limited to:
- Limited use places and cases
- In-store payment (difficulty paying in full)
- Difficulty using small amounts with minimum usable points
- Expiration according to the mileage validity period
