How Blockchain Technology is Reinventing Customer Loyalty


Customer loyalty programs in 2019 are struggling.

Consumers nowadays have many more options and are able to buy from brands overseas due to the ubiquity of online shopping. Online retailers like Amazon make it less tempting to stick with one brand in-house and instead offer up an infinite array of alternative choices.

A good loyalty program can foster enjoyment and loyalty towards a brand that can attract others. An increase in millennials sticking to a specific brand has led 57% of Fortune 500 companies to increase their loyalty program budgets over the last two years. However, issues of bulk, cost-ineffectiveness, and rigidity have hampered programs like this throughout the decade.

Blockchain, the cryptographic decentralized ledger system, is a promising fix for struggling loyalty programs looking to improve. Here’s why.

Blockchain Is Ideal for the Digital Age

Having to carry physical loyalty cards around, and a lot of them at that, just doesn’t suit the new generation of consumers.

Todd VanDuzer of Student Tutor puts it this way: “Today’s younger consumers enjoy the benefits of their phones as a multi-tool, and the lack of clutter that comes with it. There’s a freedom to being able to have a wallet, computer, planner, phone, and alarm all in one without needing to search through a purse or be weighed down by extra bags.”

Sure, many companies put out apps that have scannable QR codes to replace physical cards, but downloading ten or twelve apps just to make use of loyalty programs that pay off every once in a while just represents a different kind of clutter.

Blockchain would deal with this by only requiring a single simple sign-up process per consumer. This makes customers more likely to “join” multiple rewards programs without worrying about their wallets getting too heavy or getting sick of filling out and dropping off forms.

Consolidation and Flexibility

Using blockchain technology for customer loyalty programs would address the other primary issue currently holding these programs back: flexibility. A lack of flexibility means only getting rewarded for very specific purchases and only being able to redeem rewards in large increments.

79% of participants in a global study said that having various choices in rewards was significantly important to them. This means that increasing partnerships like those between airline, hotel, and shopping rewards we see now will most likely become more common, and the most effective way to keep track of points and redemptions across different companies is blockchain tech.

Blockchain would affect not only the back end of companies being able to integrate their various programs more seamlessly, but also the user experience. Developing a fast, frictionless user experience is key to retention and engagement, and blockchain would take the hassle out of participating in loyalty programs.

No More Third-Party Costs

Although adopting blockchain technology would cost companies upfront, that amount would pale in comparison to money saved. Brands lose money to fraud and transaction errors which should be all but eliminated with blockchain, given its simultaneously transparent and secured operational system.

Currently, a staggering 35 billion dollars a year goes to third parties who service rewards credit cards. Saving this money means companies don’t need to make the entry “cost” of earning your first redeemable reward as steep. Those savings mean that loyalty programs become more attractive with the average point value seeing an increase.

In Summary

Given these factors, the customer loyalty experience looks like an ideal niche that can benefit from blockchain technology. Increased ease of use for both businesses and their customers would drive participation and investment from both ends. Reduced third-party and operational costs means savings for companies and better reward utilization for consumers.

The transparency and centralization of blockchain also has interesting potential for loyalty programs to interact with big data analysis. This could result in personalized suggestions of what to purchase or redeem based on previous interactions. A handful of major companies have already started to integrate blockchain technology into their loyalty programs; keep a look out for your favorite brands to follow suit.

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