Reward points have gained popularity over the years and are typically offered by banks to their customers for usage of credit/debit cards, as well as by large merchants/retail chains on purchases made in their stores/portal with the main intent of ensuring customer loyalty and incentivizing further spends via utilization of these points. However, the current reward points management process comes with a number of inefficiencies including a basic lack of fungibility of points. A customer cannot use them for purchases at an online store or a super market and is instead forced to redeem the points with the institution which may not be always be possible or meaningful for the customer.
Other challenges include - a cumbersome process for redemptions, significant delays in delivery or settlement for transactions made using reward points. Issuers of reward points also face challenges since each of them need to maintain systems to track reward points issued to each customer/member, and also need to deal with reconciliation issues as a result of delayed settlement and lack of real-time availability of reward point balances. Unused reward points are also treated as liabilities in the Issuer’s balance sheet, thus posing further complications.
Managing Reward Points on Blockchain
The Reward Points solution helps create a powerful ecosystem in which issuers of reward points (banks, merchants etc), and the acquirer/payment processor can operate as nodes on the Blockchain. Each participating issuer can maintain information pertaining to their customers/members and their point balances on the blockchain. The acquirer/payment processor can facilitate the use of reward points across a vast chain of issuers thus providing flexibility to the customer in using the points. A combination of reward points/funds can therefore be accrued and redeemed seamlessly on blockchain.
- Flexibility of usage across a vast network of issuers/merchants, free of any restrictions
- Instant settlement of transactions Real-time view of transactions and balances for issuers and the payment processors
- Elimination of reconciliation overheads for all entities in the ecosystem
- Audit trail for a complete history of transactions
- Vastly superior customer experience as a result of increased fungibility, simpler operational processes while redeeming the points
- Better utilization of reward point balances, leading to healthier balance sheets for issuers
- Smart Contracts for accrual and redemption of funds and reward points
- Data privacy and confidentiality helps integrate existing systems to the blockchain, thus facilitating the set-up of the ecosystem on blockchain
- Administration and monitoring of the ecosystem through the Command Center