Greg Simon's wallet looks a lot like yours. Stuffed between the cash and the credit cards are a handful of loyalty cards he barely uses—if at all.
According to some estimates, the average U.S. household participates in 30 different loyalty programs. But that doesn't mean they're utilizing the programs. Another report found that only half of loyalty program members are active in them, and of that half, 20 percent have never redeemed any rewards at all.
But why? Simply put, loyalty programs are antiquated: It's difficult to redeem points across different offerings (between, say, an airline and a car rental company) and it takes so much time to claim the benefits the programs offer that people don't bother. What's more, there's incredible confusion on what points are worth and how they can be cashed in.
Greg Simon wants to change all that. It's the reason he co-founded Loyyal , a universal loyalty platform built on blockchain technology. His goal with Loyyal is to create a marketplace where loyalty data can be exchanged securely from one company to another and efficiently redeemed by customers in real-time.
Blockchain has become infamous as the technology on which the cryptocurrency bitcoin runs, but Simon uses it as the backbone (as he calls it) of loyalty programs. In doing so, he says he can alleviate a lot of the issues consumers face and also save companies some of the $20 to $25 billion lost (by Simon's estimates) to unredeemed rewards.
"Loyalty programs have become a source of financing for companies. When they issue rewards or points, that's like a private currency and it's recorded as a liability," Simon explains.
Blockchain's distributed ledger—a secure way to transfer information without one single administrator or centralized data center—streamlines the rewards process that Simon says is fragmented. With blockchain, brands can gather customer information and payment on a secure ledger to provide real-time redemption—creating a truly loyal consumer in the process.
Simon explains how this plays out between a popular airline and its partnership with a ride-sharing service: With blockchain-enabled Loyyal, members of the airline's loyalty program can redeem miles for rides and earn miles when they pay for a ride. Previously, the ride-sharing company kept a spreadsheet to know how much to charge the airline when members would redeem points.
"It's a very time-consuming process," Simon says.
Using blockchain, no manual data entry is required, and everything is updated in real time, securely. As soon as a ride is completed, the information is added to the blockchain, meaning the airline can see exactly what they owe to the ride-sharing service at any time. They can also make the required additions to customers' mileage accounts. It might sound like a minor convenience bump, but it can also save both companies money, Simon says.
The happy by-product of ease-of-use for the companies Loyyal works with is that real-time points redemption across a number of different offerings could actually create the loyalty most programs currently lack—and generate revenue as a result. Research suggests successful loyalty programs can generate as much as 20 percent of a company's revenue.
Converting loyalty programs to the blockchain is an ambitious plan, but it's also one that has big potential rewards for consumers. If there are more attractive rewards and it's easier to claim them—with the cost savings making up the gap—it could make these programs that frustrate so many people appealing once again.
To learn more about how blockchain can unlock the data marketplace, download our report created in partnership with Accenture.