A blockchain platform can be integrated with a loyalty platform, as well as earn and redemption partner platforms, to facilitate secure, real-time and auto-reconciled transactions, an approach which provides particular advantages for major loyalty programs that have large, expensive legacy systems. Legacy loyalty platforms often lack flexibility, limiting the ability of the loyalty program operators to innovate with new campaign concepts. A back-end blockchain platform connected to the legacy system can allow campaign rules to be exported, allowing the operator to more easily execute complex campaigns without having to develop or replace their expensive system. This can also allow for easier on-boarding of earn and redemption partners and more efficient processing of transactions, thereby reducing administrative overheads.
The global leader in this area is Loyyal (www.loyyal.com). Founded in 2014, Loyyal is an enterprise-grade Blockchain as a Service (BaaS) platform with a significant client portfolio including a major middle-eastern airline, Star Alliance, Deloitte, a large Canadian bank, Hawk Incentives (a Blackhawk Network company) and Bond Brand Loyalty. Loyalty & Reward Co were engaged as consultants in late 2018 by Australian company Reffind, a 15% stakeholder of Loyyal, which provided us with the opportunity to gain access to the team and platform to really understand the company’s potential.
Loyyal’s patented Hyperledger-based platform is designed to extend and enhance existing CRM, loyalty and enterprise resource planning (ERP) platforms rather than replace them, an astute strategy considering the millions of dollars many programs have invested in their legacy systems. Importantly, Loyyal avoid competing with these program operators by not playing in the cryptotoken loyalty space. This is a smart move, particularly in light of the struggles facing cryptotoken loyalty programs that are failing to grow their merchant and member bases while suffering large-scale crashes in their cryptotoken prices.
Loyyal’s grand vision is to build the Internet of Loyalty®; a global permissioned blockchain of program operators connected to a large base of earn and redemption partners. Any business connecting to the Loyyal platform will be able to automatically access any other business that is connected (providing that permission has been granted).
Loyalty program operators face a range of challenges. Current loyalty legacy technology is expensive to manage, scale and integrate. Any significant innovation is generally constrained by fragmented technology. The onboarding of earn and redemption partners can be complex, slow and expensive, especially if supporting real-time earn. Program interoperability, such as the processing of earn and redemption transactions between airline partners, involves inefficient, varied protocols which require entire teams to manage them.
Furthermore, coalition loyalty transactional processes are based on 1980’s designs, back when frequent flyer programs were first invented. Loyalty program operators struggle with reject and reconciliation issues caused by data mismatches, which require significant manual processing, costing time and revenue. On the member experience side, points and miles can take up to 30 days to hit accounts in an era where immediacy is a consumer expectation.
There are an estimated US$500bn of points and miles in circulation and over 3.8bn loyalty accounts in the US alone. In this massive, global loyalty industry, small efficiency gains can deliver multi-million dollar benefits, making Loyyal’s platform potentially very valuable to major loyalty program operators.
The Loyyal platform integrates with existing legacy loyalty systems to deliver faster onboarding of new earn and redemption partners, streamlined reconciliation and settlement processes and simplified data sharing among partners with reduced IT time and effort. It also supports the enablement of multi-program promotions more easily with shared liability, the ability to develop broader insight into member behaviours (including across partner programs) and the capacity to generate real-time, targeted promotions.
One company utilising Loyyal is a major middle-eastern airline that has managed to replace their two-way cumbersome reconciliation and verification process with a single step, a solution which saves them and their partners countless hours and revenue, while improving the member experience by reducing the incidence of errors.
Another company connected to the Loyyal platform is Hawk Incentives, a subsidiary of Blackhawk network, the largest supplier of gift cards in the world. Rather than having to connect to individual loyalty platforms, any loyalty operator connecting to the Loyyal platform can now allow their points and miles to be redeemed on Hawk Incentive gift cards. Programs can choose to offer physical or electronic gift cards from over 120 brands or Visa/MasterCard prepaid debit cards.
Loyyal are operating on a global level with a presence in the US, UK, Europe, Middle East, Asia and Australia/NZ. Their reach includes reseller partnerships with IBM, Deloitte, Cap Gemini and REFFIND.
I interviewed Gregory Simon, CEO and Founder of Loyyal Corporation regarding his inspiration for starting Loyyal and his thoughts on blockchain loyalty.
‘The inspiration was my personal experience in being confused and frustrated with existing loyalty programs. The ability for blockchain to potentially move value efficiently and securely was an obvious solution to some of the underlying causes. Most of the industry will remain as actively-managed branded programs. These programs are the bulk of the industry for a simple reason; consumers are loyal to the brands they interact with and consume. I believe operators of branded programs will adopt blockchain technology as their underlying architecture. This does not make loyalty points cryptocurrencies, however. Eventually, the entire industry will be blockchain-based and nobody will notice. If done properly, the consumer need not even know blockchain is powering their favourite loyalty programs. It will disappear in the background, just as the internet has behind our smartphones and TVs. Points are still points, only better.’
Loyyal are also successfully securing patents around the world. In December 2018, they announced a new patent had been approved in Japan. The award by the Japanese Patent Office of Patent for Distributed Ledger Protocol to Incentivize Transactional and Non-Transactional Commerce was yet another addition to Loyyal’s growing portfolio of intellectual property, alongside other associated patents at various stages of approval in over eight territories globally.
‘Having the scope of this innovation recognized by the Japanese Patent Office is a major step forward for Loyyal,’ said Thom Kozik, Loyyal’s Chief Commercial Officer. ‘Given the innovation and leadership Japanese firms have historically shown in consumer loyalty programs in the retail sector and elsewhere, we are excited about the new opportunities and partnerships this opens for Loyyal in Japan, and in Asia at large.’
Soon after receiving the patent approval, Loyyal secured investment from Japanese firm Recruit Co., Ltd. Recruit is a $40bn market cap Japanese company with a dominant presence in the HR, Media and Solution, and Staffing Services technologies. Recruit has strong brand name recognition in Japan. Using Loyyal, Recruit plans to aggressively enter the Japan incentive management industry, which kicked off in March 2019 at Recruit’s annual conference in Tokyo.
Japan is the second largest loyalty market in the world and very invested in the future potential of blockchain. Loyyal is well-placed to capture a sizeable share of the market with their world-class enterprise blockchain loyalty platform.
As mentioned earlier, Loyyal’s tech stack is designed to enhance, rather than replace, legacy loyalty platforms:
An API layer connects to the legacy loyalty platform, providing the loyalty program operator with access to an Admin Console (providing basic member management capabilities and operational metrics such as overall transaction volume and processing velocity) and Program Manager. The Program Manager enables the definition and configuration of incentives and other aspects of an incentive campaign. It also allows for management of member balances and other data, providing the security controls to selectively share that information with earn and redemption partners.
Interestingly, Loyyal are not the only company operating in this space.
AMEX has implemented a blockchain solution which allows retailers to create smart contracts to fulfil reward program offers. When offers are made to cardholders, the smart contract sends information about the transaction to AMEX and the private blockchain network anonymously so that it can’t be traced back to individual cardholders.
Accenture and KPMG have developed blockchain solutions to make it easier for frequent flyer program members to redeem their miles. Accenture developed a solution for AsiaMiles, while KPMG developed a solution for Singapore Airlines.
With KPMG, Singapore Airlines Krisflyer loyalty program launched KrisPay in mid-2018. The digital wallet app is accessible for KrisFlyer members and uses blockchain technology to enable travellers to spend their miles at retail establishments, hotels, petrol stations and other retail partners. Singapore Airlines CEO Goh Choon Phong stated, ‘By creating a miles-based digital wallet which integrates the use of miles into their daily lives, KrisFlyer members have yet another way to use miles instantly on everyday transactions.’ The wallet allows members to transact using as little as 15 KrisPay miles to pay for their purchases at partner merchants. Although the KPMG solution tokenises the miles, they use a static value token tied to the value of Krisflyer miles.
UK-based Supermoney are recent entrants to this space, but come with a grand vision after completing accelerator programs with BMW Financial Services and Volvo where they developed a unique digital wallet allowing in-store and online customers to pay with a simple QR scan. The product runs on a system of smart contracts that effectively and efficiently manage counterparty risk, protecting both buyer and seller.
Supermoney are utilising blockchain to strategically focus on enterprise software solutions, loyalty program transformation and digital payments (using stable coins to facilitate faster, more secure transactions). From a loyalty perspective, their blockchain layer can link existing and new loyalty programs to support currency interchangeability, increasing the liquidity available to members.
A global juice chain are one of the first clients to sign. Their existing loyalty program will be linked to allow their members to transfer their points outside the program for redemption at other participating merchants, or transfer points in from other merchants to redeem on a free juice. The central tool for members is the Toucan App, which tokenises different loyalty currencies and supports the collection, trading and redemption of tokens across the retailer network.
I interviewed Supermoney CEO Joel Smalley about the company’s vision and strategy.
‘Our principle objective is to increase the value of the loyalty programs of our customers that we support. We see that this can be achieved by increasing visibility and liquidity. By tokenising points or miles on the same platform where we tokenise money as a regulated financial institution, we can subsequently display those loyalty tokens alongside their digital money in the wallet, making them visible at every POS transaction. More visibility inevitably means more utility, and liquidity increases as a result. In addition, customers of partners who elect to allow their loyalty tokens to be transferable can exchange those tokens for more desirable ones more easily under this approach. Ultimately, a DEX (decentralised exchange) can be integrated making it easier still for tokens to be traded, subject to necessary regulatory compliance, and even for the participation of market makers (liquidity providers). We expect at least 25% uplift in value as a result of increased liquidity and further benefit from superior insight into consumer behaviour and digital engagement.’
Having such significant companies embrace blockchain to solve real-world challenges is an exciting indicator that the technology certainly does have something valuable to offer.
This is an excerpt from Blockchain Loyalty: Disrupting loyalty and reinventing marketing using cryptocurrencies (2nd Edition) by Philip Shelper.
Blockchain Loyalty is available at all good book stores. Buy it now.