How blockchain will help make customer loyalty schemes more valuable to customers and businesses

By Jason Hulott | Guest Authors

Loyalty programmes have been around for a long time as customers continue to enjoy collecting loyalty points and getting rewards. In the UK, over three quarters of the population are members of some form of a loyalty programme and nearly half of them believe that loyalty programmes encourage their brand loyalty. This is not confined to the UK. Over the last five years enrolments in loyalty programmes in the US increased by 40% over, so did the businesses that have a programme.

A loyalty programmes is an important tool in the marketing mix, particularly for retailers. As a result businesses spend a lot of money on loyalty programmes, as these can generate up to 20% of a company’s profits.

However, the industry has stagnated with a large number of look-alike programmes causing customer boredom. One primary drawback with current loyalty points is that it takes too long to reach the redemption threshold and the value is too low to excite customers. Despite huge participation and increasing memberships in loyalty programmes, customers are generally not satisfied by the way rewards can be redeemed and find it difficult to earn a meaningful reward. Moreover, the current methods of loyalty points exchange are very limited and expensive. As such, there is scarce opportunity for a customer to pool their points for a higher-value redemption.

A staggering $360bn worth of points lie unredeemed worldwide, £6bn in the UK alone. Programmes are suffering from account inactivity, low redemption rates, and time delays – all adding to the disappointment felt by customers. High transaction costs, system management and customer acquisition costs mean loyalty schemes don’t always deliver the best return for the business either.


What customers want are personalised, easy and hassle-free experiences. They want to feel truly rewarded for their loyalty and enjoy the power of choice and flexibility.

The good news for the loyalty industry is that there is plenty of scope to innovate, a lot of room for competition, and the opportunity for increased and improved interaction with the customers. What’s needed to make this a reality is a cost-effective and efficient way to manage loyalty programmes which will deliver a much better customer experience.

Customers also want to manage all their loyalty cards in one place, to view their available offers, vouchers, and gift cards, and to exchange and pool points for a higher-value redemption; for something they really want, something that feels like a genuine reward for their loyalty.

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To facilitate this loyalty programmes need to go fully digital. Most of the small and independent businesses use paper cards and stamps to reward their customers, but customers tend to lose the physical cards or forget they had one. Additionally, paper loyalty cards don’t generate any insights about your customers. They can’t tell you what products they favour or how receptive they will be to various offers, for example. A digital loyalty programme and/or loyalty app can give you this information.


A potential way to re-engage customers through loyalty programmes could be to provide flexibility and more options on redemption by allowing exchanging points between programmes. Let’s take the example of a small independent café in Shoreditch. The café allows its loyalty points collected from coffee purchases to be exchanged for Airmiles, a spa day, or money off their supermarket shop, for example.

By allowing an exchange, this café increases the perceived value of their loyalty points, offering greater value to its customers and driving improved brand loyalty. This particular café will be more appealing than a café that allows customers to only redeem points internally.

However, exchanging loyalty points has, to date, been time-consuming and expensive. Platforms offering loyalty point exchanges tend to charge hefty exchange fees, requiring customers to sacrifice a lot of their points’ value. But with recent technological advancements, such as blockchain technology, this will change. 


Blockchain allows the creation of a secure network of loyalty programmes, which would facilitate the instant and effortless exchange of points. Every participating business would benefit from reduced costs of transactions and higher transparency and flexibility. It would also provide them with meaningful insights into their customers wants and behaviours, allowing them to create targeted campaigns.

For example, solutions like LoyalT use blockchain technology to cost-effectively integrate any business, of any size, from any industry into a single loyalty points exchange network. These solutions allow businesses to extend more value to their customers with a real-time loyalty points exchange facility while marketing their business to customers beyond their own programme members. Our Shoreditch coffee shop can essentially offer Airmiles, or points of another business by simply opening up to an exchange.

How will businesses benefit?

In return for offering an exchange of points, businesses will benefit from deep insights on customers’ shopping habits, helping them generate more customer engagement through precision marketing.

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SMEs especially can gain from being a part of an exchange solution for loyalty points. Not only will they be able to access a massive pool of customer data to help run precision marketing, but they can also get set up quickly and easily, facilitating point exchanges with huge global businesses at a very competitive cost. As such, small businesses, such as our Shoreditch coffee shop, can set up a digital loyalty programme and almost immediately start offering loyalty points on every purchase and open up exchange to some of the highly-desirable loyalty programmes.

Are there any security and data concerns?

Data use and privacy are hot topics at the moment. The beauty of a loyalty network running on blockchain is that businesses own and control the data of their customers, minimising privacy concerns. Blockchain in itself is highly secure and the data is encrypted. Further, advanced digital contracts keep information secure and private.

Meanwhile, the network acts as a bridge between the business and its customers. A good way to describe it is to say that loyalty points are currencies and businesses are loyalty banks. The loyalty network facilitates the exchange, just like payment networks facilitate the transfer of money between customer accounts. Since blockchain automatically creates an unalterable ledger, it is impossible to falsify, making employee and customer fraud a thing of the past while keeping points wallets incredibly secure.

After decades loyalty programmes are undergoing a transformation. Large businesses are augmenting new technologies like Machine Learning, Artificial Intelligence, etc. to improve their marketing strategies to make programmes more desirable. 

Integrating different programmes across brands into a single, consolidated loyalty network will provide aggregated data and an overall view of customer spend and preferences. In return, customers get to spend points at their business of choice, exchanging points to meet a higher redemption value. With this, even a small business can give more value to its customers by opening up to an exchange. 

There is an exciting future or loyalty programmes that small businesses and their customers can all look forward to.


Animesh Ghosh is an industry thought leader and expert in Blockchain, AI and IoT solutions with over 22 years of experience as Consulting Partner Architect and higher, in global companies like Lloyds, RBS, Wipro, Infosys, Virgin Atlantic, etc.

Animesh is also founder and CEO of KornChain ‒ a technology company that is building a global blockchain network for the loyalty marketing industry.

Animesh and his team have recently launched LoyalT. KornChain’s LoyalT® seeks to be a global loyalty point exchange network powered by Blockchain & AI. Customers can earn, spend, exchange & consolidate points in real-time while businesses benefit from customer acquisition, repeat-sales and deep insights. On-going implementation with large clients.


  1. Making blockchain real for customer loyalty rewards programs, Deloitte
  3. Jeff Berry, “The 2015 COLLOQUY Loyalty Census: Big Numbers, Big Hurdles,” COLLOQUY, February 2015.

About the Author

Jason Hulott is Business Development Director at Digital Marketing Specialists, Speedie Consultants. He is Google Partner certified. His role is to identify and implement traffic generating and revenue increasing ideas for our client base.