Ai Editorial: 3 ways in which blockchain can uplift airlines’ loyalty program

Ai Editorial: Be it for interoperability between programs and partners, targeted offering or enabling stronger relevance in a customer’s everyday life, blockchain technology promises to lend a new dimension to loyalty, writes Ai’s Ritesh Gupta

 

Blockchain, as a database technology, is opening up new value propositions.

 As a concept, blockchain features a distributed ledger, which is an array of cryptographically-linked blocks supporting data records. This data, which could be a Bitcoin transaction, a smart contract etc. is decentralised, and, as it is being said, this data can’t be manipulated.  The possibility of working with a network’s shared ledger is via a “chaincode”. Such codes “read and write values” to the ledger.

The use of blockchain and smart contract technology is exploding worldwide, says Robert Moerland, EVP – Global Business Development, Loyyal.

Referring to a recent report issued by the World Economic Forum, he says over US$1.4 billion has been invested over the last 3 years in the technology in the financial services industry alone. Over 2500 patents have been filed.

“Many believe that 2017 will be the year that blockchain will break through on a wide scale,” says Moerland.  

In the travel industry there are a number of projects underway, for example, secure biometric authentication of passengers by SITA that will simplify document checks during the passenger journey. Loyyal is the only company that has a built technology stack available for travel loyalty programs today.

Fostering loyalty

So how this emerging technology is proving to be beneficial for the travel industry, especially loyalty programs?

Here are a couple of concrete examples:

-       Increasing efficiency: One of the advantages is cutting down complexities associated with cross-enterprise business processes. “On a basic level, interoperability between programs and partners that use the same dataset to record and transfer value will result in enhanced efficiencies in transaction processing and invoice reconciliation,” Moerland says. “For travellers, this will result in quicker availability and better usability of their points and miles”.

-       Targeted offering: One can also bank on smart contracts for a special offering. “One can create a whole new world of value propositions. One example is the possibility of multi-branded points that have a special value or benefit associated with them, potentially for a limited period of time. This means for travellers that more relevant targeted offers with an increased value will become available in a higher frequency,” says Moerland.

Sub-programs or multi-branded offers generate more value not only for customers, but also for merchants as program partners

-       Increasing relevance: As Moerland says, there are cases that help to boost engagement and hence program profitability by enabling stronger relevance in a customer’s everyday life, greater currency liquidity and higher velocity of transactions. For example, the interoperability powered by Loyyal allows programs to join efforts in rewarding members leveraging each others’ redemption capabilities. Also, it can be used to create “fungibility of loyalty currencies” by easier and faster exchangeability or combined offers.  

So how should airlines prepare for blockchain technology?

Moerland says most programs are looking how to continue and expand the monetization of their data and currency.

“As such we find that they are open to making changes to their infrastructure in order to become “future proof” and get ready for an increasingly connected world (think also IoT). This connected world means in the case of the loyalty industry a global distributed ledger catering for new and broader ecosystems compared to the fragmented and siloed way the programs co-exist today,” pointed out Moerland.

Being realistic

In general distributed ledger networks face a number of challenges relating to regulations, security, privacy, speed and performance, infrastructure replacement and standardization. However, when applied to ecosystems like loyalty programs, a lot of those challenges can be addressed by creating multiple interoperable private networks on one universal permissioned distributed ledger. In fact, Loyyal aims to become that standard protocol/ ledger that enables interoperability between programs and partners, whilst providing the tools to agree on the rules of engagement between the parties via their patent-pending Abstracted Value Consensus Protocol.

Moerland also asserted that blockchain is not the solution to each and every problem.

It is important to evaluate whether the solution one is looking for is best solved by a blockchain solution or in another way. It is also important to recognize that an effective blockchain solution depends to a large extent on the data that gets into it in the first place. Again, blockchain caters for more efficiencies and new capabilities, but it only gets as good as the data that gets into it.

In layman’s terms the blockchain itself creates a shared repository that helps multiple parties to look at the same data, a layer of truth so to speak, says Moerland. This not only simplifies data exchange and invoicing processes, but also enable new datasets for analysis and  target marketing purposes.

But just recording data is one thing, actually doing something with the data is what matters. “Smart contracts allows to apply rules to points and miles, that not only govern the way they are recorded or what action they trigger, but also enable to assign dynamic qualities to them. Points and miles become records of behavior rather than simply units of value, and can be targeted as such with “incentification,” shared Moerland. “Interoperability between parties combined with this new way to generate relevance and value will help to shape the next generation of loyalty programs.”

For Loyyal, being a blockchain technology specialist with a commercial product, it is still early days in terms of being able to fully demonstrate and substantiate the ultimate vision with tangible results. “We believe that next year we will see a major change of perspective on and uptake of blockchain-based solutions”,  concluded Moerland.

 

Interested in blockchain technology? Hear from experts at the upcoming 7th Mega Event Worldwide 2016, The Event for Loyalty, Ancillary & Merchandising & Co-Brands, to be held in Toronto, Canada. (25 -26 October, 2016).

Twitter hashtag: #MegaEvent16

Follow Ai on Twitter: @Ai_Connects_Us

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