In the US alone, the average household has memberships in 29 loyalty programs, with airline frequent flyer programs being one of the most common. Consumers are navigating a confusing maze of disconnected points and rewards systems—and quite frankly it’s unsustainable.
The technology that can streamline the rewards process is already here. Blockchain, known as the technology that supports Bitcoin, could be the solution the industry needs. Here’s why:
Blockchain Brings What Customers Want: Simplicity, Immediacy
Even in the digital age, when technology is supposed to be making everything a breeze, a staggering 64% of travelers say rewards programs are overcomplicated. On top of that, 36% say the points or rewards expire before being able to use them. This is unacceptable—and it is why Blockchain could transform loyalty programs.
Even Hal Brierley, a loyalty program expert who helped American Airlines create the AAdvantage program, the world’s first airline loyalty program, agrees that disruption is on its way. He notes that the reason the AAdvantage program was launched was to reward repeat customers, create a better customer experience, and build brand loyalty. Airline loyalty programs still have this same goal today, Brierley attests. But to better achieve it, he believes these programs can’t be so complicated. As Brierley says, “We’re in a time-starved world...what the consumer wants is simplicity and immediacy of rewards.”
Airlines have been making great strides in simplifying their rewards programs, like Southwest Airlines, who consistently ranks at the top in airline loyalty program rankings. But there’s still more work to do. Airlines must truly make earning and redeeming rewards easy and accessible for their customers.
So, why is blockchain the solution? Well, blockchain is an open, digital ledger of transactions that have been executed using currencies like Bitcoin. Designed to securely protect information between participating parties, blockchain assigns a unique algorithm-token to each transaction. These tokens are combined into blocks, creating a secure and verifiable record of transactions. The records are decentralized, rather than having to rely on servers to verify everything. As transactions are continually made, blocks are added to the chain.
Blockchain enables these transactions to be shared across a network of participants. This allows travelers to make transactions safely and quickly with airlines—and it’s all neatly secured in one place.
Blockchain Can Provide Visibility and Transparency to Airline Loyalty Programs
Airline loyalty programs should be aware that 63% of consumers believe rewards programs are too hard to use. Another statistic shows why this is true: 33% of millennials dislike rewards programs because there are too many cards to carry. Clearly, the lack of unification between rewards programs makes it difficult to keep track of points and utilize them advantageously.
It’s simply a hassle to deal with a system that has multiple programs, currencies, is overly complex, and contains fragmented point collections (flights, cars, hotels, etc). And, if you want to combine points between non-partner airlines, the exchange rates given to consumers are bad enough to make currency booths seem fair. Perhaps this is why there are currently 9.7 trillion unused frequent flyer miles around the globe.
Improved visibility and transparency across airline loyalty programs can be achieved with blockchain. By bringing fragmented and multi-currency loyalty programs into one unified platform, blockchain could provide instant redemption and exchange possibilities for members. This way, customers would have greater ability to maximize use of their miles or points.
Blockchain technology could even allow the entire industry to work towards a unifying currency, like bitcoin. This would make transferring points between non-partner airlines, like Etihad Airways and Emirates, much easier.
Blockchain Technology: A Plus for Both Airlines and Customers
Let’s return to the fact there are 9.7 trillion unused miles out there. For airlines, miles left sitting there are a balance-sheet liability, as airlines can’t report revenue attributable to the value of points until those points are used for goods and services. Adopting blockchain would enable airlines to quickly add and maintain loyalty partnerships without adding complexity, thus creating more - and easier- redemption options. As customers redeem points, airlines have the opportunity to recognize more revenue and build brand loyalty.
Blockchain technology can strengthen partner networks through simplification, unification, and transparency. This will make earning and using points across a network of partners a seamless process. The platform created by blockchain technology could also give airlines a significant amount of customer data. This enhanced visibility into what the customer wants will undoubtedly make airlines better at personalizing offers for individual travelers.
Realizing the Potential of Blockchain
Platforms like Expedia disrupted the airline industry in the early 2000s—and now airlines are paying out billions to third-party platforms each year. Given the precarious state of airline loyalty programs, companies must stay ahead of disruption this time. The key could be in adopting blockchain technology.
For airlines and customers, the blockchain revolution can be a tremendously good thing—as long as it’s done correctly. First, we need to adopt the technology. Second, partners need to agree on how points (i.e. currency) can be exchanged across the blockchain platform. Third, there must be a commitment to protecting customer information in the transaction ledger. If airlines can do these things right, and ensure fair competition exists on the platform, the future looks bright.