Making blockchain real for customer loyalty programs

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Customer loyalty and engagement can make or break companies, and as such, rewards programs represent strategic investments for all types of organizations. But as they have been growing rapidly, they are also still ailing due to inefficiencies. There are several reasons for this, but first and foremost is we believe the paucity of uniform management systems is a primary source of members’ lack of activity.

In this installment of the Deloitte Center for Financial Services series on blockchain, we explore how this powerful technology can help realize the full value of customer loyalty programs. Any organization (from banks to airlines) that have rewards programs can take note of the gained efficiencies, reduced costs, and enhanced brand loyalty that this powerful technology can provide.

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Loyal customers are one of the primary drivers of any for-profit business. By building loyalty rewards programs, companies aim to heighten the customer experience. In many cases, however, the opposite has occurred. The implementation of blockchain can drive the customer experience to the next level, and here’s how:

  1. Reducing costs
    Although blockchain incurs upfront expenses, we believe that the trade-off cost savings will be identifiable on three major levels–system management, transactional, and customer acquisition. A blockchain-based loyalty rewards program should reduce system management costs with smart contracts that report secure, tracked, transparent transactions to legacy systems, reducing costs associated with errors and fraud.
  2. Enabling a frictionless system
    An airline credits a customer’s rewards in the same digital wallet from which he/she redeems them for the hotel. Through a trustless, decentralized technology solution, blockchain is centralizing the customer’s loyalty programs. Loyalty providers decide how and with whom the customer uses these rewards, but from a consumer perspective, his/her ability to access and manage them is practically frictionless.
  3. Making the process near real-time
    Blockchain can enable a transaction to be recorded and accessed by multiple involved parties in near real time, increasing the chance that a loyalty rewards program provider can cut through coordination inertia to credit points faster.
  4. Providing a secure environment
    Blockchain creates an immutable and time-stamped distributed database entry of every single transaction ever made, making each transaction and its record easily traceable, but also rendering them irreversible, preventing double spending, fraud, abuse, and any other type of manipulation of the transactions.
  5. Creating unique business opportunities
    At the onset of building an interlinked loyalty network, large loyalty rewards program providers with well-developed programs will have unique opportunities to offer value-added services to other businesses.

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