Are Loyalty Programs Crypto’s Path to the Mainstream?
09.17.2018

Those in the blockchain community understand how the world will be reshaped by this innovation, yet a majority of the public has little interest, understanding, or first-hand experience with the technology. Al Burgio believes he can change that.

“As with most innovative things, you need to cross the chasm and answer the question, ‘How do we bring this to the masses?’” said Burgio, a serial entrepreneur and the founder of DigitalBits, just before taking the keynote stage at the Blockchain Futurist Conference in Toronto last month. “We see a big vehicle for that in loyalty and rewards programs.”

While 58 percent of Americans have heard of bitcoin, only 5 percent currently own any of the cryptocurrency. When asked what’s preventing them from jumping into crypto, 40 percent said it was unnecessary, 35 percent said it was too risky, and 27 percent simply didn’t understand how it worked. Burgio says blockchain solutions are either too technical or too early for the average consumer. “It’s hard to get excited about something that is five to 10 years out,” he says.

Burgio, however, thinks he’s found the key to raising public awareness and understanding. While not everyone is interested in owning cryptocurrency, a majority of the population already collects a form of digital currency: rewards points. Eighty percent of American adults belong to some type of loyalty rewards program, and memberships in the U.S. grew by half a billion between 2014-2016.

“I don’t want to fit society into blockchain, I want to fit blockchain into society,” says Burgio. “What that means is if there’s already a learned behavior, there’s an opportunity to provide a seamless solution that society is already doing.”

Rather than trying to convert customers one by one, however, Burgio is focused on attracting brands to his blockchain-powered platform. Creating liquidity within the loyalty rewards industry by allowing consumers to convert points in one program for tokens that can be sold or traded for rewards in another, he says, will increase the perceived value of the rewards.

Convincing large organizations that greater liquidity in their rewards programs will ultimately increase sales, however, is no easy feat. After all, brands design such programs to keep customers coming back to them rather than their competitors, so why would they willingly allow the points their customers earn to be transferred for a competitor’s rewards?

“Some people just give up [on the rewards program]. They get frustrated,” says Burgio. “If I had a peer-to-peer market where I could go to transfer, trade, and so forth, now I can incentivize giving it to someone who can spend them, and it feels more like money.”

While a small subset of consumers are considered loyalty rewards enthusiasts, far more don’t pay much attention at all; more than $100 billion worth of unclaimed loyalty rewards points currently sit in the digital wallets of Canadians and Americans, 57 percent of whom don’t even know their balance.

If the perceived value of a blockchain-powered loyalty programs is greater than existing rewards programs, Burgio says, consumers will eventually demand it. He also suggests the blockchain-powered platform can provide benefits to existing rewards programs, including enhanced security, a better user experience for consumers through increased authentication and faster transaction speeds, and potentially lower operating costs.

Burgio doesn’t think the Hiltons or Deltas of the world will be the first to convert their millions of members to new blockchain platforms. “For those that are maybe in 10th place in their category, this presents a competitive advantage,” he said. “These are among the first movers, then come the willing followers, then collectively it goes mainstream with the unwilling followers.”

Of course, Burgio isn’t the only one trying to make rewards programs more compelling or liquid. Hilton Honors announced last year that members could spend points to shop on Amazon, for instance, and credit-card points can be used for a wide variety of things including booking hotels, flights, access to airport lounges, and even Uber rides.

He’s also not the only one using blockchain to improve upon existing options. In February, Singapore Air, for instance, said it would be launching a blockchain-based digital wallet for its loyalty program; management consultants are lauding its possibility for clients; and competing companies, like Loyyal, are also in the mix. (Then there’s the possibility that most blockchain loyalty startups won’t catch on at all.)

But Burgio is undeterred. DigitalBits recently announced a partnership with Caddle, a Canadian company that offers consumers cash back for purchases, watching ads, answering surveys, or writing reviews. DigitalBits is also offering an early access program in an attempt to educate brands that might be interesting in transitioning to the platform.

“I see this becoming mainstream much faster than other things in blockchain,” said Burgio. “A lot of what you hear in blockchain is five or 10 years out, but I see mainstream adoption in this area much sooner.”