According to the latest Bond
Brand Loyalty Report, memberships across industries continue to rise and
now average 14.8 per person. But - considering total global spend on loyalty
programs is estimated to be $323 billion in 2019 – a more critical
statistic is: on average people are active in less than half (6.7) of the programs
they belong too.
More often than not, loyalty programs do not drive loyal behavior.
The travel sector has some of the lowest satisfaction rates,
according to Bond’s survey of 55,000 consumers in more than 20 markets around
the world. Only 37% of hotel loyalty members and 38% of car rental members say
they are satisfied with their programs; airlines, meanwhile, fare slightly better at 42%.
Says the report, “In the travel industry alone, Bond estimates billions of
dollars in customer spending is left on the table when brands fail to address
the 14% gap in customer expectations versus current experience along the travel
journey. By re-tooling travel loyalty programs and closing the gap to better
meet expectations, customer spending in the travel category alone could grow by
provide a solution - both for companies looking to bring down program costs and
boost loyal behavior and for customers looking for faster reconciliation and
more plentiful earn-and-burn options?
founder and CEO Animesh Ghosh is one of a growing number of voices who answers
that question with a resounding yes.
2018, KornChain is creating a blockchain-based global loyalty points exchange
marketplace called LoyalT. The company is one of 13 startups in the latest
class of IAG’s Hangar 51 global accelerator program.
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industry has been deprived of technology,” says Ghosh, who comes from a
background in finance and banking.
bigger players have a huge amount of loyalty points sitting in their balance
sheet that is unredeemed and that is a liability. Then they have to amortize - which nobody wants that. If you have too many loyalty pints unredeemed, that
means only one thing: that your loyalty program is not working.”
By using blockchain’s smart contracts to define and automate
- and therefore expedite – the entire rewards process, companies decrease the administrative
and personnel costs of their loyalty programs.
And by creating a hub for partnerships with built-in
security, transparency and rules, loyalty members can easily earn rewards from multiple
providers and exchange them on the network without any cost in the form of “lost”
points, thereby incentivizing behavior to earn rewards.
“The market today is prohibitively expensive,” Ghosh says.
“There is a [loyalty] company... that if you have some points, let’s say Delta Air Lines points and you want to convert to Icelandair, they would absorb 70% of the value of your loyalty points. That is the situation in the market. We want to make it zero for the customer.
“In our case if a company has a loyalty program and they
want to allow customers to use them somewhere else, that customer is not going
to lose anything. We make money only from receiver end, where we are bringing
money to them in the form of loyalty points.”
In addition to working with IAG and other large companies
that he cannot yet name, Ghosh says KornChain is working to onboard a variety of small- and
medium-size businesses in more than 20 countries that could create new options
for their loyalty members if they join the system: For example, a local coffee shop's customers could use their rewards on a British Airways flight.
Qiibee is another system in development since 2018 that
offers enterprises a plug-and-play solution to running their loyalty programs
on blockchain. Companies create tokens that function as loyalty points and can
be exchanged with partners also on the network. Customers store, transfer and
trade those tokens in the Qiibee wallet app.
Why can’t I pay my Uber ride with my air miles. That is the direction we are thinking and envisioning...
Gabriele Giancola - Qiibee
Current companies using Qiibee include Swiss coffee producer
Lattesso and German restaurant/bar chain Sausalitos, and co-founder and CEO Gabriele
Giancola says about a third of the companies he is talking to are related in
some way to travel.
“You could have much more connection
in the whole travel market. It makes so much sense that everything you need for
a trip should be connected,” Giancola says.
“This is our vision,
that you can very easily exchange from one program to another. Why can’t I pay
my Uber ride with my air miles. That is the direction we are thinking and
envisioning, but for that we know it needs more time.”
Giancola says he expects adoption of blockchain-based
systems to ramp up in the next few years as the technology becomes more
commonly accepted – and as brands recognize they need to serve consumers that
“What is super important is to understand you have a completely
new generation of customers coming that are used to very, very fast rewards,”
“[Companies] have to change their perception because they
are used to customers that are, let’s say businesspeople of a certain age that don’t
have a problem if they have to wait one or two days for an exchange of points.
But if you are a young person in your 20s, and you are used to Facebook,
Instagram, you don’t wait one to two days for a transaction. You want it directly.”
What may create a tipping point for adoption is a successful,
large-scale blockchain integration by a prominent brand. And that is now closer
to reality with the announcement last week from blockchain loyalty and rewards
system Loyyal that it has signed a three-year commercial production vendor agreement
with The Emirates Group, following a successful pilot that began in 2018.
Loyyal CEO Greg Simon says while he is most excited about
the potential to create a better experience for Emirates Skywards’ 25 million
members, the partnership is starting with a focus on reducing operational
costs for the airline.
“When you’re talking about loyalty programs there hasn’t
been much technological innovation for decades. It’s been these old clunky
databases, and it’s effectively become a source of funding for these large
companies because they run these breakage targets. It’s why we all hate our programs,
because they aren’t run to improve loyalty, they are run as a source of
financing for that company through that breakage,” Simon says.
“They are really focused on the profitability of the
programs, and being able to go in to them and say, 'We can reduce your partner
costs by 80%.' That gets them a lot more
excited than if I say, 'We can use smart contracts to do targeted marketing for
all of your consumers.'”
Simon says currently Emirates has more than 120 partners in
its rewards program, each with a unique integration and reconciliation process,
so the first step is getting those partners to migrate to Loyyal’s platform.
“All the partners would connect through the Loyyal
product suite, which is through our distributed ledger, and then Emirates would
access it through one point of connection as well,” he says. Participating
partners also benefit from automated, real-time reconciliation.
Founded in 2014, Loyyal was one of the earliest developers
of blockchain-based loyalty and rewards solutions, and Simon says it is no
longer a matter of convincing companies that this is the future.
“We’ve been able to reach out to a large part of our target
market, which is the large program enterprise market, and can say pretty
confidently now that overwhelmingly the majority consensus is that this
industry [loyalty rewards and incentives] will move to blockchain. Now the
challenge is getting them to do it,” he says.
Giancola agrees and says the barriers are the same when any
new technology is coming to market.
“It was the same for social media, the same for e-commerce. Maybe what makes our work a bit more difficult is we have
to educate people that Bitcoin is not equal to blockchain or crypto is not
equal to blockchain,” he says.
“But in the next five to 10 years, every loyalty system
will be on the blockchain. That’s what we believe and that’s what we are