Are Loyalty Programmes Ripe for Disruption?

In this article, we delve into the evolving landscape of loyalty programmes, the challenges, and the opportunities that lie ahead from the point of view of our experts.

Today’s loyalty programmes are mostly focused on credit card spending. With ongoing macro and micro economic pressures, there is a heightened sense of urgency to launch innovative products and services to capture new revenue streams. Enhancing the payment experience seems to offer the easiest path to improve customer retention and engagement.

What does the market result show?

Engagement varies among the best-in-class loyalty programmes, suggesting that there is still a significant journey ahead for many to reach the best possible levels of engagement. Considering the 2020 valuation of the global loyalty programme market at USD 200 billion, this represents a significant opportunity.1

It is no secret that these programmes lack customer-centricity. Customers perceive many of these schemes as low value due to irrelevant rewards offered and a lack of transferability, leading to the expiration of points.

Most of these programmes focused solely on earning and spending points. In evaluating loyalty programmes, it is essential to consider their effectiveness and potential for improvements. Here are some key questions to ponder:

  1. What can you do to have a more improved programme?
  2. Can your programme turn a customer into an advocate?
  3. Can it be more exciting and lead to customer stickiness?

Web3-based loyalty programme opportunity

Loyalty programmes can be so much more than they are today. Token-based loyalty schemes, in particular, can attract the younger generations. The frenzy of recent years has shown us that Web3 has the potential to build community and drive engagement.

Utilising tokens
In this context, an interesting market case study is NuBank, a leading digital bank based in Brazil. Its meteoric rise, boasting more than 80 million customers and leading the market in South America, has been an example for many in the industry.

In the first quarter of 2023, NuBank launched a new loyalty scheme built around the crypto token NuCoin. This innovative approach allowed them to rethink the fundamentals of their loyalty programme. Placing the client at the centre, they aspire to create more aligned incentives, build a community, and gamify the experience with the bank.2

Users can earn tokens through their daily purchases and engagement within the broader community built around the bank. These tokens serve a dual purpose: used to offset daily purchases or strategically locked for access to more exquisite benefits and higher-level discount tiers. This dynamic ecosystem, together with the option to sell points to other participants, can create more engagement among the devoted participants. According to the latest results, the banks’ engagement metrics consistently climb to new highs every quarter.

Data and interoperability
Another fascinating aspect of Web3-enabled schemes is their approach to data and interoperability. It is no longer a secret that today’s loyalty programmes struggle to drive business with aligned KPIs due to the complexity of balancing data protection and behavioural analysis. Security and architecture of the public blockchain networks can support that.

Enhancing user engagement with digital collectibles
Other compelling examples are ZA Bank and livi bank, both located in Hong Kong. These banks are actively experimenting to drive user engagement through digital collectibles. ZA Bank, for instance, has introduced an NFT (non-fungible token) maker, enabling users to create NFTs based on digital artwork.3 Meanwhile, livi bank has been innovating with NFT-based Lucky Draws.4

The future of loyalty programmes

While the long-term results of such schemes are yet to be seen, the challenges put a bet that future loyalty programmes will likely be tokenised. Web3 can serve as a key enabler for the future of loyalty, creating better experiences and meaningful opportunities through gamification and engagement.

At Synpulse, we understand that loyalty programmes are on the cusp of this transformation, and we are here to help our clients seize the opportunities of this era. With our expertise and innovative approach, bolstered by the capabilities of our tech powerhouse, Synpulse8, we can help our clients harness the full potential of Web3 to revolutionise loyalty programmes.

Speak with us to find out how our experts can support your organisation.

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