Digital Currencies vs. Loyalty Points
By Space Coast Daily // April 11, 2022
The latest buzz in the cryptocurrency arena revolves around competing with loyalty programs/points. One question that is under debate is whether cryptocurrency rewards promise more than loyalty programs do. The other is whether digital currencies will eventually replace loyalty points. Here you can read about the biggest misconception that Bitcoin is for the rich only.
Cryptocurrencies vs. Loyalty Points
No longer are loyalty programs/points as popular as they used to be earlier. Nowadays, people do not seem so eager to gain hotel points, airline miles, etc., as rewards. Instead, they prefer to own cryptocurrency tokens, Bitcoins, Ether, or Stablecoins, as rewards. The rewards could be for using specific Apps, owning credit cards, flying frequently on the same airline, etc.
A Deloitte study discovered that companies are comprehending that the merging of blockchains and loyalty programs makes them customer-friendly. There is a lessening of costs. The earning and expenditure of points in a secure environment is almost like a real-time experience.
Another study, the Bakkt Loyalty and Rewards 2022 Outlook discovered something amazing. Around 72% of people, who belonged to varied loyalty programs, had purchased digital currencies. They had done so, at least once, over a duration of six months. Many of them knew what they would gain by opting for crypto rewards, rather than loyalty points.
An Introduction to Loyalty Points
Loyalty programs/points are merely incentives. They are meant to encourage loyalty to a brand, or to a business/shop. Such incentives encourage customers to visit the same place repeatedly, for purchasing services/goods. The greater the expenditure, the greater the number of loyalty points. Customers may exchange them for valuable experiences, items, or upgraded services.
Loyalty points/programs came into being, way back in 1896. Sperry & Hutchinson had launched the S&H Green Stamp program then. Customers would receive green stamps while interacting with department stores, supermarkets, gas stations, etc. These retailers are related to S&H. The green stamps permitted customers to obtain anything from the stores or mail order catalog of S&H.
Texas International Airlines brought out a loyalty program too. Every time a customer flew with them, the distance (in miles) would be recorded. In turn, this would convert into loyalty points. The loyalty points could be traded for free flights, later.
The 20th century was famous for the issuance of rewards to people possessing credit cards.
An Introduction to Cryptocurrency Loyalty Programs
Today, it is the turn of cryptocurrency companies to offer loyalty points, or rather, cryptocurrency points. The user may gain something by revisiting the same cryptocurrency exchange. Then again, there are rewards for using credit/debit cards. Sometimes, the viewing of online educational modules is enough.
The rewards may take various forms. For instance, BlockFi allows the conversion of Bitcoin into any of seven other coins, if the user has a credit card. Similarly, Coinbase permits debit card users to trade in 100+ digital currencies. Fold allows card spenders to earn Bitcoins.
Other companies are joining the fray. They include Crypto.com, Gemini, Venmo, etc.
It All Depends Upon Financial Perspective
Admittedly, cryptocurrency rewards and loyalty programs/points are different. Yet, they prove advantageous in their own ways.
■ Loyalty points are governed by centralization. Cryptocurrencies operate in the decentralization model. Even crypto wallets are decentralized. Therefore, loyalty points remain at fixed values. These values are decided by the concerned program of the business/store. They may undergo changes at any time, depending upon the centralized authority’s desire to garner greater profits.
In contrast, the values of decentralized cryptocurrencies and wallets fluctuate in alignment with changing market trends.
■ Customers with loyalty points in tow are known to be the initiator of the program. The financial institution has the personal details (names and addresses) of various members in hand. There is also awareness of useful consumer information, spending habits, patterns of redemption, etc. This helps to bring necessary changes to advertising patterns, such that they always appeal to audiences.
Cryptocurrency transactions, in contrast, are anonymous, since the platform is decentralized.
■ Generally, loyalty points lack cash value. The rewards are more in kind. Then again, the earned points must be used quickly. In the absence of usage, the loyalty points lose value.
In contrast, the redemption of cryptocurrency rewards brings more cash into the user’s account. It is possible to keep track of the concerned cryptocurrency’s value in alignment with the fiat currency in real-time.