6 Reasons For Singapore Airlines’ Blockchain-Based Loyalty Program

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Singapore Airlines KrisFlyer loyalty rewards program

Singapore Airlines is launching the world’s first blockchain-based airline loyalty digital wallet. It’s a big validation for blockchain as industries including retail, hotel and credit card issuers weigh cryptocurrency-based loyalty programs as a source of funding and operational improvement.

A digital wallet app for its KrisFlyer loyalty program will launch in six months and it’s signing up retail partners in the Singapore market to start. “I think we are the first airline to do it,” Singapore Airlines CEO Goh Choon Phong told the Singapore Airshow Aviation Leadership Summit, according to Reuters.

The carrier plans to invest “hundreds of millions” of dollars in the coming years to stay competitive against global rivals. Five reasons why Singapore Airlines it’s bullish on blockchain:

1) Flexibility. Cryptocurrency-fueled loyalty programs are more flexible than miles rewards programs that limit usage with redemption guidelines and black-out dates.

2) No depreciation. While loyalty points depreciate over time, cryptocurrencies are interchangeable with other digital currencies, programs or money, and the market decides the value of the tokens.

3) Enhancing KrisFlyer’s value. Passengers can earn points through flying then spend them at participating retailers using the KrisFlyer digital app—a win for customers. By increasing the amount of partners involved in its loyalty program and the ease of spending miles, SIA could see customer loyalty rise for both the program and the airline.

4) Cost-effective. Traditional rewards programs are expensive for a company. It costs Singapore Airlines an extra seat every time a customer redeems miles for a free flight. The airline carries more than $700 million of deferred revenue due to outstanding miles awaiting redemption.

5) Re-investing. With a blockchain-based loyalty program, when a customer cashes in 50,000 miles for a business class seat, the company can turn and sell those miles in the market for an equivalent amount of cash—essentially funding the company’s loyalty program.

6) Revenue generation. Launching an ICO would enable Singapore Airlines to raise capital by selling its own miles/tokens or by issuing stock when their stock prices rebound.

Blockchain and Travel

German airline group Lufthansa and Air New Zealand teamed last year with Switzerland-based start-up Winding Tree to build blockchain-based travel apps, and European travel group TUI has created a blockchain-based inventory system for hotel bookings.

Sandblock (SAT) is a blockchain built on Ethereum, making it easier for small businesses to join larger company’s loyalty programs and distribute rewards, points, and incentives. While many companies are creating their own tokens, Sandblock built a consortium using the SAT.

“An ERC20 token, SAT is Sandblock’s share currency and is the index that the individual companies personally branded tokens are based on. Instead of creating their own token, each company has their own Branded Token pegged to the SAT. This helps prevent the volatility of each individual merchant’s token. In other words, each company is participating in the ecosystem through the medium of the SAT.

“Sandblock is yet another way that blockchain is being applied to existing programs, industries and business practices. The revolutionary technology of blockchain, recently through Sandblock, is fundamentally changing the way people interact and respond, both as consumers and vendors.”

Being Loyal to Loyalty Programs

According to a study by Phocuswright, two-thirds of U.S. travelers participated in travel loyalty programs in 2016—a majority of them in multiple programs.

“We are a generation of consumers that is used to Uber telling us in a few seconds who our driver is, what time they are pulling up, what it will cost and what route we will take,” said Thom Kozik, chief commercial officer at Loyyal. “When I run across a loyalty program that says it will take 30 days for bonus points to show up in my account I have to wonder what the heck is going on. And then it trickles into a negative brand perception of the company behind that loyalty program that wow are they that archaic that it takes so long to tell me something so simple.”

Data-sharing of consumer behavior between partners can also speed-up the on-boarding process. “I can simply look in your wallet and see you’ve redeemed points for a hotel and a flight for a Grand Cayman Island. Now I can offer you a car. “I didn’t have to do anything inside the marketing systems of either the airline or hotel to do that. I simply have my existing partnership relationship that lets me see the data on the chain,” said Kozik.

“Loyalty program innovation is a massive area of spending. Everyone’s looking at how they innovate, re-engage the consumer and keep them loyal. The number one thing that keeps coming up is the liquidity of the currency and its relevance to that member’s lifestyle. And that’s what blockchain can facilitate.”

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