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Retailers Are Accepting Crypto. Should Loyalty Programs Be Next?

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By: Bryan Pearson |

Posted on June 3, 2021

You can’t hold loyalty in your hand. So it’s fitting that 44% of people would like it measured in cryptocurrencies.

That is the percentage of Americans interested in receiving encrypted, digital currencies, such as Bitcoin, Ethereum and Dogecoin, as an alternative to traditional cash-back reward programs from retailers, according to a recent national Harris PollThe survey, performed for the coupon-code site CouponCabin, gauges consumer understanding and impressions of cryptocurrencies.

Once a hard-to-grasp concept, cryptocurrencies are experiencing their “arrival,” gaining both consumer familiarity and retail acceptance. More than three in 10 Americans describe cryptocurrencies as the "future of money," the Harris Poll shows. Not surprisingly, younger consumers are early adapters – nearly 28% of millennials own or have owned some form of cryptocurrency. 

In response, a growing number of retailers are now accepting the currencies. They include:

  • Starbucks SBUX -2% now allows its reward members to convert cryptocurrencies into cash balances on their Starbucks cards, via a third-party app called Bakkt.

The current, post-pandemic environment is pretty near perfect for cryptocurrency’s spread. Consumers quickly adapted to a range of new technologies in the past year, so their appetite for change has been whetted. This extends to reward programs and how they can be modernized to meet members’ amenability toward new concepts – especially younger members looking for new ways to digitally engage with programs. Retailers need to innovate to attract these audiences to their programs and ultimately to their stores.

Encrypted Rewards Are Loyalty’s Post-Pandemic Opportunity

If consumers and retailers see cryptocurrencies as the future of money, then it’s just a small step to seeing them as the future of the loyalty and rewards industry.

These four reasons not only explain the benefits of incorporating cryptocurrencies into a loyalty platform, but how they could change the trajectory of the industry.

1. Crypto-linking can serve as a gateway to the new currency. Lots of credit card issuers include card-linked offers (discounts or cash-back rewards) among their benefits, including America Express AXP -0.2% and Visa V -0.6%. Even Uber issues card-linked Uber Cash to users who pay with a Visa card (through the Visa Local Offers Program). Among age groups, 52% of millennials take advantage of this option, compared with 47% of Baby Boomers and 41% of Gen X. If retailers fold cryptocurrencies into their card-linked models, loyalty programs can provide members with an easy entry into owning this emerging form of money. Visa is the first to take this step with its practically named Bitcoin Rewards Credit Card, released this spring, which issues cash back that can automatically be converted into Bitcoin and deposited into an account. There, the currency can appreciate, be traded, used as collateral on a crypto-backed loan or be withdrawn and spent at retail.

2. They can remove currency barriers to sharing data. Unlike reward points, Bitcoin and its brethren are universal currencies, even across domestic borders. This presents an opportunity for retailers and other companies to form virtual partnerships through which they can share and elevate the value of member data. If members receive their points in the form of Bitcoin, for example, they can redeem them with any merchant. Retailers that partner with Bitcoin can form an alliance, and members can redeem with any of the participating members. Such “coalition” models, popular in Canada and Europe, encourage more activity and improve data analytics because merchants can see how their customers spend with other brands.

3. Cryptocurrencies could limit liabilities. The reward points issued by an organization are carried on the books as liabilities, because they carry value that is expected to one day be cashed in. By rewarding cryptocurrencies, instead of points, companies can draw from their own pre-purchased bank, or ledger, of the encrypted money. There are accounting watch outs: Cryptocurrencies can be “indefinite-lived intangible assets,” and as such would not record yet-unrealized gains due to a value increase (similarly, unrealized losses are not immediately tax deductible). The value of cryptocurrencies do fluctuate, but if the rewards issued are tied to percentages of a currency, the risk may be managed. And over time, keeping rewards in cryptocurrencies may be better than not earning anything on reward points. As an option for consumers, retailers will see the risk-takers lean in.

4. The options are booming. More than 70% of Americans are familiar with Bitcoin, the Harris Poll research shows, which can present a marketing edge for companies that offer it as a reward. However, one key drawback is its price tag, which in mid-May approached $50,000 apiece. This could turn a substantial number of market-shy reward members off. Enter the class of new cryptocurrency options, many of which are creating their own brand images to appeal to different customer values. Ripple, for example, claims to reduce risk by working directly with financial institutions, removing the need for transactions to be “mined” – verified and added to the blockchain ledger. This feature is important to environmentally concerned members, as well, because mining requires powerful computers that consume a surprisingly high amount of electricity. (This is why Tesla has backed out of accepting Bitcoin.)

The Most Valued Currency Is That Of Choice

Cryptocurrencies present risks and rewards, but the simplest argument for at least testing them as an alternative to reward points is that consumers like choice. And following the lightning-quick adoption of many new technologies in the past year, they are more willing to take a chance on something new.

Retailers could analyze their own loyalty data and issue member surveys to determine their own customers’ sentiments toward cryptocurrencies. But if 44% of consumers already are willing to trade cash- or points-based rewards for crypto-rewards, the more consequential questions may involve which currency to offer, how to account for it and what it will look like tomorrow.

Cryptocurrencies are changing fast, and they are altering the financial industry with equal speed. If retail loyalty adopts them, it can expect the same. By tracking the successes and missteps of early adapters, retailers may get a real hold on crypto success.

Update: This article has been updated to clarify that Home Depot is no longer accepting cryptocurrency as a form of payment.

Bryan Pearson is a Featured Contributor to The Wise Marketer and currently serves as a director and strategic advisor to a number of loyalty-related organizations. He is the former CEO of LoyaltyOne.

This article originally appeared in Forbes. Be sure to follow Bryan on Twitter for more on retail, loyalty, and the customer experience.