Loyalty programs are meant to engage the customers and bring more business out of it. However,building a loyalty program is expensive and not easy.
Future state program
Loyalty points from different companies and brands would be identified as different colored coins on loyalty management blockchain. The ‘colored coins’ concept is used to implement real world assets by setting up a ledger in blockchain. These colored coins or tokens assigned to a brand or company will be interchangeable as per the agreed exchange rates. This would make redemption operation much simpler. This integrated loyalty network would remove the transactional friction between the various siloed systems.
The loyalty engine is the core of the whole loyalty program. It calculates, updates and redeems the points. It applies rules on transactions in real time, converts into points and updates. These points-based treasury operations could be made autonomous with smart contracts. Smart contracts are self-executing contractual states stored on a blockchain, which nobody owns and everybody trusts. Smart contracts would relieve the loyalty program engine of the responsibility of operations, and authority remains with all the stakeholders involved.
Refer to Figure 1, points ledger is a distributed ledger with multiple user nodes and multiple tokens on a blockchain. This points ledger would be the single source of truth for managing the loyalty points. Merchants do not need to have separate databases and reconcile. The users have control over their points, although they pertain to a certain color (brand/company/ industry). Users can redeem the points conveniently via a single interface, rather than multiple loyalty platforms. Additionally, in such a system, users would be able to transfer points between themselves, which is not a feature of any loyalty program today.
Great value add
Blockchain, by its virtue brings value additions like making the transactions real-time. Hence, the loyalty platform becomes faster.
Blockchain-based points ledger makes it transparent, and thus reliable. Single points ledger removes the need to have captive ledgers by merchants, that makes the system lighter