There is ongoing discussion in the loyalty industry about whether blockchain and Web3 have a future in loyalty programs. Some companies like Starbucks stopped using blockchain in their Odyssey program because it did not work well. Several attempts to create cryptocurrency-based loyalty rewards have also failed.
This has made many loyalty experts think that blockchain and Web3 are not useful for loyalty programs. However, there are some very successful infrastructure solutions that are giving big advantages to brands that invest in these new technologies.
Blockchain technology has become a promising way to solve loyalty program problems and change how customer loyalty programs work. This article looks at the benefits, challenges, and potential impact on the industry, especially for the incentives, merchandise, and gift card sector.
What is blockchain? Blockchain is the technology behind cryptocurrency, which is the most famous use of this technology. However, cryptocurrency is not right for loyalty programs, but there are many other ways to use blockchain. Blockchain is a system that stores information across many computers in a secure and transparent way. Each piece of information is stored in a block, which connects to other blocks, creating a chain of blocks. The main features of blockchain are that it cannot be changed, it is transparent, secure, and spread across many computers. This makes it perfect for industries that need to manage sensitive customer information and offer valuable rewards to members.
What are the benefits of blockchain in customer loyalty programs?
Better Security: Blockchain uses special codes to secure transactions, making it very hard for fraud and tampering to happen. This keeps customer data and loyalty points safe from unauthorized access.
Transparency and Trust: Because blockchain is spread across many computers, all transactions are recorded on a public record. This provides transparency and security while reducing fraud risk and costs.
Working Together: Blockchain allows different loyalty programs to work together seamlessly. Customers can earn and use rewards across multiple platforms. This enables highly personalized and local offers at a large scale and in real-time, which is harder to do with older technology.
Real Examples: Kivi, a loyalty program in Switzerland that works with multiple partners, uses blockchain to improve security, transparency, and the ability to work with other programs. Loyyal, a loyalty program provider, uses blockchain solutions to make transaction settlement and partner integration easier through smart contracts, improving customer experience. Kris+ from Singapore Airlines is one of many new loyalty programs based on blockchain that enables secure, real-time, automatically balanced transactions for loyalty and retail partner platforms. Chain4Travel has created a blockchain community of over 100 brands, including big companies like Lufthansa, where all members have influence over the strategic direction. This has created a solution that enables personalized and local offers at scale.
Blockchain technology is ready to significantly impact the incentives and gift card sector by changing how rewards and gift cards are created, managed, and used through loyalty programs.
One of the main benefits of blockchain technology is its built-in security features. By using special codes and networks spread across many computers, blockchain can provide a secure system for creating and tracking incentives that cannot be tampered with. This increased security can help prevent fraud, counterfeiting, and unauthorized use of rewards.
Blockchain’s transparent record allows for real-time tracking of transactions, providing complete visibility into how incentives and gift cards are created and used. This transparency and security reduces fraud risk.
Because of blockchain’s ability to work seamlessly between partners, incentives and gift cards can be exchanged across various platforms. This ability to work together can improve the flexibility and usefulness of rewards for consumers, who can easily access and use their incentives across multiple partner programs.
Converting Rewards to Digital Tokens: Blockchain allows rewards to be converted into digital tokens that can be easily traded, transferred, and exchanged.
Smart contracts are self-running contracts with agreement terms written directly into code. They can automatically create, distribute, and process incentives and gift cards based on set conditions. This automation can make reward processes smoother, reduce administrative work, and ensure program rules are followed.
The use of blockchain technology in customer loyalty programs is still new, but the potential for innovation and major changes is significant. Blockchain technology has great promise for changing customer loyalty programs by improving security, transparency, and efficiency.
In conclusion, blockchain technology can transform how incentives and gift cards are used in the loyalty industry by improving security, transparency, the ability to work together, and efficiency in reward programs. Businesses that adopt blockchain innovation in this sector can benefit from better customer engagement and operational effectiveness.
