Crypto assets & loyalty management system Prashant K Singh 1, Harihara Vinayakaram 2 1,2
Wipro Technologies, India E-mail: prashant.singh40@wipro.com, harihara.natarajan@wipro.com
Abstract Loyalty programs for customers are industry agnostic – be it retail, banking, consumer goods, travel, hospitality, telecom, aviation or e-commerce. But, misfunctioning loyalty program can lead to dissatisfaction of customers. Key reasons for the misfunctioning loyalty programs are – Siloed or poorly integrated reward programs, inflexible reward structures & limited redemption options. In this paper, we propose to leverage blockchain and design a multibranded and interoperable loyalty platform for a group of companies. This paper highlights our thoughts, model and significance of proof-of-concept made on this idea. Keywords: Loyalty program, Blockchain, Redemption
1. Background & related work Customers love reward points or redeemable loyalty points as they deliver great value to them. Companies maintain loyalty systems and give out reward points to understand customer behavior better and to keep them on board. Research by Markets and Markets indicate that this market is expected to grow by 173% from 2016 to 2021 and touch $4.59 billion. But it is a great effort by companies to establish, marketize and run the program. Loyalty programs are run by siloed IT systems. The companies can have a collaborative Loyalty platform because the effort put by companies is repetitive and overlapping. Also, customers would love to have the loyalty points of a company to be redeemed with multiple other companies. The primary shortfall of current loyalty systems is that they are a closed loop, which means that the users can only trade value within those systems or redeem value via limited products offered. Imagine an open system for multiple providers where loyalty points could be easily exchanged across industries. It will be easy to accommodate any new merchant/provider into the system, making it a standardized solution in the market. After all, airline or retailer, bank or card network’s loyalty program, at the core are all centrally managed ledgers.
The Loyalty ledgers should be integrated, yet owned individually. Blockchain can help in developing a potential solution where an integrated yet open system of loyalty points management can be set up. It can decentralize the load of effort put by the companies individually. Blockchain would add value in three aspects: points treasury, redemption operation and rule based smart contracts. The loyalty engine is the core of the whole loyalty program. It calculates, updates and redeems the points. It applies rules on transactions in real time, converts into points and updates. These pointsbased treasury operations could be made autonomous with smart contracts. Smart contracts would relieve the loyalty program engine of the responsibility of operations, and authority remains with all the stakeholders involved.
2. Model & Technical details Loyalty points from different companies and brands would be identified as different coins on loyalty management blockchain. These coins or tokens assigned to a brand or company will be interchangeable as per the agreed exchange rates. This would make redemption operation much simpler. This integrated loyalty network would remove the transactional friction between the various siloed systems. Various merchants (companies) of the network would be as blockchain nodes, while maintaining their own ledger of users and their holding balances. It is easy to imagine it like a consortium of companies and with agreed terms & conditions of usage on loyalty network. Merchants also have the view of network and worth of its token in the loyalty network.
Figure 1. Diagram for loyalty program
Refer to Figure 1, points ledger is a distributed ledger with multiple users and multiple tokens on a blockchain. This points ledger would be the single source of truth for managing the loyalty points. Merchants do not need to have separate databases and reconcile. The users have control over their points, although they pertain to a certain color (brand/company/industry). Users on their loyalty app, can redeem the points conveniently via a single interface, rather than multiple loyalty platforms. Additionally, in such a system, users would be able to transfer points between themselves, which is not a feature of any loyalty program today. The PoC (Proof-of-Concept) is made at Wipro blockchain lab using Hyperledger. It is able to demonstrate user functionalities like: 1. User wallet dashboard 2. Loyalty points history 3. User redeeming the points with other merchant 4. User able to transfer the points to other user. It is able to demonstrate merchant functionalities like: 1. Merchant dashboard & statistics 2. Program rule definition settings 3. History of points conversion. Merchant systems & partner systems can easily and independently operate their own branded loyalty token by setting the conversion rate. Productionizing such a network application will trigger major adoption in the industry. A few scenarios (with some contextualization) where this solution would make sense - 1. A conglomerate trying to implement an umbrella loyalty application for its multiple companies underneath. 2. A credit card company or a bank trying to integrate reward programs with companies across industries for it’s customers 3. A geographically located cross industry consortium for companies to jointly incentivize their customers 4. A government setting up a non- cash incentivization scheme for the residents or a particular sect of people. There are multiple active discussions going on these prospects.
3. Discussion & conclusion One of the key aspects of this blockchain-based loyalty platform would be that it will allow users to participate in a transaction anonymously and still get the value as a participant/trader. Anonymity is maintained by the transaction encryption in the blockchain system. Treasury & redemption based on smart contract rules leaves no doubt from user’s perspective and brings incredible amount of user’s trust into the system. It provides convenience and a rich experience to the end users. The greater value addition would be the open nature of the system for all the stakeholders – consumers, merchants, companies, loyalty program owners and system managers. This DLT (Distributed ledger technology) based solution cuts out the redundant operations and helps lower operating costs. Thus, the cost of maintenance of loyalty programs is reduced and eventually smaller merchants will also be able to afford them. Theoretically, with such a universal platform, loyalty points could become the second currency.
Acknowledgment: The authors would like to express appreciation for the support of Wipro Blockchain COE. References: [1] Prashant K Singh, “Using blockchain for loyalty management programs�, Wipro Insights 2017 [2] M. Swan, [Book] Blockchain: Blueprint of New Economy, 2015.