Blockchain Use Cases for Loyalty Programs and Rewards

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Written by
Shivani Tripathi
Published on
October 26, 2022


From banks to airlines to retail stores, customer loyalty plays an important role in building your brand. Engaging with customers through loyalty programs and rewards is a critical part of your journey as a company.

However, these outreach programs face various glitches ranging from inefficiency to functional or technical problems. Blockchain technology has the potential to help companies realize the incredible value of customer loyalty and rewards.

Why Use Blockchain for Loyalty and Rewards Programs?

loyalty programs

Blockchain has created a revolution in the loyalty industry

Loyalty programs are an integral part of travel, retail, financial, and other services and sectors. However, they face many issues.

They have to maintain different customer data, and point systems, keep track of purchases and points, redemption options, and processes for exchanging points. This makes it not just inefficient but also difficult to access and inconvenient for customers and companies that are organizing it. 

So why should your company consider blockchain for loyalty programs? Blockchain offers many benefits that can change the way your loyalty outreach works and improve the effectiveness of these schemes:

1. Record and Share Transactions Efficiently 

Managing and recording transactions is an essential part of loyalty and rewards. It is also a key challenge.

For example, every time a loyalty point is issued, redeemed, or exchanged, it is another transaction to be incorporated into the system. When a new transaction takes place, the blockchain creates a unique token for that transaction. What's more, each transaction is validated.

These tokens are grouped into blocks that are updated at once on the shared ledger. This enables different stakeholders across the network (both customers and company personnel) to access it. As new transaction blocks are added, it creates a reliable and verified record without involving intermediaries or large centralized databases.

By reducing transaction costs and automating many manual processes, blockchain can thus make loyalty and rewards programs more cost-worthy.

2. Streamline Redemption and Exchange of Points

With multiple redemption programs, it can be a tedious process to redeem loyalty points. Adding to this, each program has its options, conditions, and rules for redemption, not to mention multiple loyalty point currencies. 

For example, in the travel industry, programs can be split into different components like flight, hotel, and car rentals. This can lead to fragmentation in the process of collecting points and a loss of points. It also means that points have to be converted across these different segments. 

Blockchain enables this to be streamlined and made more transparent. Each transaction is updated on the blockchain and accessible to the concerned stakeholder. It also enables greater flexibility through cryptocurrency rewards, smart contracts, and programmable blockchain networks. 

3. Improve Access and Ease of Use

Rewards schemes are supposed to contribute to customer satisfaction and incentivize customers to spend on your brand.

Yet, in many cases, customers end up frustrated and irritated with rewards schemes because of the inconvenience involved. For instance, the process of checking and redeeming points is often cumbersome. 

Accessibility is another key issue. Loyalty programs can be difficult to access for customers and other stakeholders involved (such as third parties who participate in the program by offering their services).

Members often have to wait for their rewards or points to be credited. Transparency is also an issue as it is often difficult for customers or other parties to check their points or transactions or update them themselves.

Blockchain can help improve the transparency of the process and make it easier to access. The data across different segments are recorded, connected, and stored uniformly. All the concerned persons can access it in a decentralized manner without having to go through the company. 

How Do Blockchains Rewards and Loyalty Programs Work? 

reward & loyalty program

Blockchain rewards and loyalty programs usually have the following features:

Smart Contracts System 

Blockchains can help companies manage loyalty and rewards programs through smart contracts. These are programmable digital contracts that execute automatically when the conditions are fulfilled.

This helps reduce administrative costs and allows for easier management of loyalty points and rewards.

Data Security and Verification 

The transaction data is secured and cannot be tampered with. Customer data is protected, and only tokens for rewards are exchanged. Since transactions are updated on a shared ledger, they can be verified by the different participants. 

Blockchain Cashback

One of the key issues that loyalty programs face is that the reward points expire before the customers can use them. Blockchain loyalty programs work through the cashback mechanism, which means customers can store the rewards as tokens and redeem loyalty points whenever they want. 

Examples of Blockchain Use in Loyalty Programs

Various businesses ranging from major credit card companies to travel and e-commerce companies have adopted blockchain. Here are some use cases of blockchain rewards and loyalty programs:

Cryptocurrency Rewards 

Several companies, such as the credit card company Visa, are partnering with Bitcoin to implement cryptocurrency rewards.

This program provides a bitcoin equivalent of a cashback reward in which a consumer gets a certain percentage back in bitcoin on every purchase. They also get a certain amount in digital currency if their expenditure crosses a certain baseline amount within a stipulated period.

Rakuten, a large e-commerce business in Japan, has also initiated a loyalty program in its cryptocurrency called Rakuten Coin.  

Blockchain Networks

Companies have used blockchain networks to simplify their reward systems. Singapore Airlines announced that it is adopting blockchain for its rewards on miles. It launched its blockchain-based payment network that allows customers to use airline miles rewards to pay at certain select retailers.

Financial services provider American Express also announced that it is using Hyperledger to allow retailers to offer American Express rewards on purchases made in their stores. 


Blockchain technology is changing the way the loyalty industry works. Compared to traditional loyalty programsblockchain rewards offer better security and more efficiency.

Blockchain also opens the doors for innovation in loyalty and rewards initiatives. It offers myriad possibilities for engaging customers, encouraging brand loyalty, and cooperating with other parties in mutually beneficial schemes.

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