What the internet did for communications, blockchain will do for trusted transactions.
So what is Blockchain?
Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet, and you have a basic understanding of the blockchain. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet.
Blockchain enable two entities that do not know each other to agree that something is true without the need of a third party. As opposed to writing entries into a single sheet of paper, a blockchain is a distributed database that takes a number of inputs and places them into a block. Each block is then ‘chained’ to the next block using a cryptographic signature. This allows blockchains to be used as a ledger which is accessible by anyone with permission to do so.
Introducing Blockchain as a customer loyalty solution
Loyalty programs are often considered as one of the most efficient ways for businesses to retain customers. The Deloitte Center for Financial Services (DCFS), in a recent report, claims blockchain technology can improve customer loyalty and reward programs. Its chief benefits are in allowing companies to join their rewards program in ways not previously thought possible and it would simplify reward programs by linking multiple programs that consumers are already a part of.
Blockchain implementations of customer reward programs will give businesses a secure and verifiable record of transactions, particularly for their rewards programs. This technology’s record at solving problems is proven; blockchain in what made Bitcoin the first digital currency to finally solve the ‘double spending’ problem, in which customers can sometimes spend a single unit of digital currency multiple times. Although modern customer reward systems now have built-in protections against this problem, its impossibility within a blockchain deployment makes blockchain an attractive collaboration tool.
Reward points will be transferrable across participating businesses. Retailers and other businesses could take advantage of common markets to enhance the usefulness of their reward programs to their customers. Travelers, for example, could book a hotel and receive automatic discounts at their nearby restaurants through their rewards app.
Customers will benefit from the linkage between different retailers’ reward programs as it will reduce the number of total memberships that customers already have to keep a track of.
Blockchain brings benefits
Blockchain has the potential to streamline administration and execution for program providers because of real-time transparency. A blockchain based loyalty program should reduce system management cost with smart contracts that report secure, tracked, transparent transactions to legacy systems, reducing costs associated with errors and fraud.
The blockchain can connect a largely disconnected realm of loyalty rewards programs, eliminate friction, reduce costs, bring redemption and credit to near real time, and improve business relationships. Blockchain has proved it can deploy through digital wallets and social media and can interact with existing loyalty rewards platforms via smart contracts. An online protocol, programmed building blocks and smart contracts give blockchain technology the ability to act without intermediaries.
A widespread diffusion of decentralized architectures would create an immutable and time-stamp distributed database entry of every single transaction ever made, making each transaction and its record easily traceable, but also rendering them irreversible, preventing double spending, fraud, abuse, and any other type of manipulation of the transactions.
Mobile phones are part of the solution:
The only way to move forward with a blockchain- powered rewards system is through mobile applications. Blockchain will introduce tight security into the mobile app payments, thus making more people embrace the technology. The blockchain technology calls for a full-proof ledger which will log all your transaction details, and the entire focus is on keeping the data secure. By providing an interface that can cut through the underlying complexity of blockchain implementations, consumers can get all the benefits of a flexible rewards program among multiple businesses without any additional hassle.
Applications of blockchain technology in travel:
As the backbone of digital currency, blockchain is already revealing its value in areas such as transparency, data security, logistics and process simplification, and even regulatory compliance.
The travel business is complex and fragmented. Merchants that sell travel are typically seen as a high risk because of a number of refunds and chargebacks that occur in the industry. But with blockchain, once a payment has been made, typically you can’t reverse it. And this mechanism will make fraudulent cases easier to spot and less likely to occur. Blockchains are, after all, about decentralizing services and removing the middlemen to lower costs, speed up transactions, and add transparency
For example, with blockchain processes serving as the underlying authentication layer for biometric-equipped mobile and wearable devices, a passenger’s experience becomes easier, faster and more satisfying. They can verify their identities, purchase travel products, and ancillary services before, during and after their trips. They can communicate with airlines in a variety of new and engaging mobile formats without pulling out IDs and expose personal financial information every single time
To extend the vision from a passenger’s perspective, imagine going from home to the airport for a flight, then from the destination airport to your hotel and straight to your room without standing in a single line or sharing your personal data. Managing frequent flyer and loyalty programs and tracking baggage can also be a piece of cake, using blockchain technology as the information “connector.”
The beauty of this vision is that it serves as a genuine win-win for both the airline and its customers. And by contributing to customer satisfaction, an airline is much more likely to retain and grow that source of revenue, not to mention the range of ancillary purchases that become easier with blockchain technology.
While blockchain is very much about moving values, it’s also about handling and securing data in better ways.
For blockchain-based loyalty programs to succeed, providers must establish an Omnichannel presence. In addition to traditional channels like email and contact centers, providers have to consider mobile and social media channels.
Blockchain certainly has a potential to bring changes to the industry but perhaps it would be fairer to consider it as a system facilitator rather than a replacement for a current system. Besides, the success of the undertaking would largely depend on whether enough companies actually adopt the technology meaningfully. Customer loyalty programs powered by mobile apps are a natural fit, and it is exciting to see how blockchain will spread into this area.