It might seem as if buy now, pay later (BNPL) and cryptocurrency are being used everywhere, but there’s at least one big space where they have plenty of room to grow: loyalty programs.
Offering the possibility of converting rewards into crypto or connecting to fast-growing installment payment plans can benefit consumers and merchants alike, Rodrigo McCarthy, executive board member at novae, told PYMNTS in an interview.
Crypto gives consumers who receive rewards and spend them an additional channel for using points and provides greater liquidity to the ones they’ve accumulated.
“A lot of players in the early days were reluctant to jump into the cryptocurrency world but now are slowly accepting that it’s a space they have to play with,” McCarthy said. “We think that it just brings an additional channel and attractiveness for users to be able to make good use of their reward points.”
Building Loyalty, Not Unused Points Balances
Merchants who embrace crypto rewards can reap the benefits by giving consumers a quick and easy way to use their loyalty points directly at the point of sale (POS). Customers using novae’s Miles Blue app, for example, can transfer the crypto to the app and buy a cup of coffee without the barriers they might otherwise run into when using crypto.
“One of the benefits to the merchants is they will be able to accept crypto as a payment form without really having to integrate with, let’s say, an exchange or anything,” McCarthy said. “With our Miles Blue platform, we do all the transferring on the back end and channel this onto a virtual card, and it happens instantly.”
Consumers typically only redeem about 30% to 40% of their reward balances in any given year, throwing a wrench in potential efforts to measure just how effective the rewards programs banks, airlines and other businesses offer customers are at building actual brand loyalty. In extreme cases, McCarthy said, this can even create potential accounting liabilities.
As a result, he said crypto in the rewards space is gaining traction as players that haven’t been keen on the practice in the past are starting to adopt it.
“So, we are very much focused on trying to provide the most seamless experience for users to be able to redeem their points, to make good use of it, generate a high perceived value, and therefore generate that loyalty effect that our clients are looking for,” McCarthy said.
McCarthy said novae has also expanded its BNPL program, enabling customers to pay in installments using their reward balances.
“That’s obviously going to depend on the appetite that our clients have in order to finance those points or not, but that’s another trend that we’re seeing in the market, allowing a lot of payment installments, financing on purchases,” McCarthy said. “So why not use your rewards to be able to do the same thing?”
Offering Something Innovative and Cool
Ultimately, McCarthy said, reward programs improve customers’ experience by giving them a variety of ways to use their reward balances and more merchants where they can use them.
“The ultimate goal obviously is for our clients to create that loyalty effect with their customers and generate incremental spend value on their card portfolios, be that credit, debit or potentially prepaid,” McCarthy said. “Bringing all of these innovative features together with an omnichannel experience ends up being very disruptive.”
Financial institutions that offer rewards programs are also becoming more interested in crypto, he said. Whether they were concerned about volatility or simply didn’t have the resources to get started, many banks that were hesitant to embrace crypto rewards now want to participate. The same is true with BNPL.
“This is a way that they can tap into and offer something innovative and cool for their customers, with minimal effort, and have something up and running in a matter of weeks,” McCarthy said.