HomeNewsCompanies Applying Blockchain For Better Loyalty Programs

Companies Applying Blockchain For Better Loyalty Programs


Customer loyalty and engagement are among the most important metrics for measuring modern retail company’s success. To woo potential customers and reward the long-standing ones for their patronage, almost every successful business nowadays employs loyalty programs of some sort.

Statistically, you, dear reader, most probably have participated in loyalty programs on several occasions and used coupons, plastic cards and digital notes which had some value within the network of the company that decided to reward its customers.

And from personal experience, you can probably attest that traditional loyalty programs suffer from an entire host of maladies.

To name a few, there is an obvious lack of a unified system which leads to low liquidity of loyalty points. Rewards are only redeemable at certain establishments and often not easily so. And of course, digitization is a must in the modern world.

While some loyalty rewards are even now trackable or redeemable online, still they are not digital assets in and of themselves. And of course, there is always the necessity to use the intermediaries, like banks, which by itself increases the costs and introduces additional security risks.

Blockchain is the magic word

Those are all very familiar issues to anyone who’s been following the advance of Blockchain technology in the real sector of the economy. Many industries have by now experienced the new disruptive paradigm of Blockchain and loyalty programs could not remain an exception for long.

There are industries that can use Blockchain and there are industries that absolutely need it. Loyalty programs fall somewhere in between. The benefits are clear and real. Blockchain gives program providers simple and efficient tools which facilitate unmediated interaction between customers, managers and individual vendors.

We all know by now that Blockchain is tamper-proof and pretty secure. But perhaps the most compelling benefit of Blockchain is cost-efficiency. Loyalty programs cost a fortune to develop and maintain while Blockchain solution can do the job better at a fraction of the cost.

The last thing that has to be mentioned is the tokenization of loyalty points. Basically, being built on a cryptocurrency token, loyalty rewards can be freely transferred between people and even exchanged for fiat or other cryptocurrencies on crypto exchanges.

Does it work?

To this day a number of solutions facilitating an interlinked loyalty reward network have been created. Complete digitization provides a great opportunity for integration of many different loyalty programs on the same platform and that was the path chosen by most of the existing projects.

Although the decentralized nature of Blockchain compels every project to create their own financial ecosystem, loyalty programs may become an exception. As they are not the main business activity of any company, joining a consortium effort does not involve serious risks that could mitigate the benefits.

One of the most pressing challenges for a new Blockchain ecosystem is attracting enough participants to the budding market and a seamless loyalty reward space can be advantageous in accomplishing that task. A compelling argument not to be brushed aside easily.

With just one wallet to accumulate all reward points in an integrated financial infrastructure, customers would not need to memorize each program’s rules and redemption options and vendors will not have to worry about the liquidity of their reward points.

The first Blockchain-based customer reward program – Ribbit appeared back in 2014. Since then several other platforms like Loyyal and Blockpoint were launched.

The projects are quite similar and simplistic in nature but invariably we see new iterations of this concept resurfacing now and again. So is it a trend exploitation or does the market actually need more of those?

More of that, please

One would think that joining an already existing large conglomerate would always be more beneficial for the participants in the end. Not exactly. Turns out there is still great value in decentralization when it comes to reward programs.

To illustrate why under certain circumstances it is beneficial to create a completely separate customer loyalty system, one could take a look at the newest player on the market, BioCoin.

This Russian-based startup is not just a loyalty platform designed to incentivize consumers with Blockchain-based units of value. The platform’s broader goal is to facilitate the eco-friendly and healthy agricultural paradigm worldwide.

In a nutshell, BioCoin is meant to support eco-farmers and organic food retailers and allow them to return value right into their local communities via a system of rewards and discounts. To achieve this, a separate economy is necessary because it will allow to preserve and multiply value within the community.

To sum it up, there is a clear incentive to build loyalty platforms encompassing separate industries that rely on positive feedback from the community. Blockchain today is steadily permeating the loyalty programs sphere but its success depends ultimately on whether enough retailers and consumers around the world would dare to adopt this trending but still unpolished technology.


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