Blockchain technology is set to revolutionise commerce as we know it. Not just because it powers cryptocurrencies – though that too – but because of its potential impact on loyalty programmes and in helping to deliver personalised experiences to customers.
Let’s start off by looking at why blockchain powered cryptocurrencies should be embraced.
You would have been unlikely to miss the hype about Bitcoin earlier this year when its value reached a high of $16,522 in January.
Consumers indeed took notice and, as a result, now is the time for retailers to recognise the emergence of cryptocurrencies into the mainstream.
While the value of Bitcoin has halved since that January high to fall to around $8,800 as I write this article in late April, it’s worth remembering that in January 2017 it was $900 per Bitcoin.
Nevertheless, I believe the longer-term trend is growth in value and therefore popularity of digital currency, which is something all retailers must acknowledge, mainly as they are set to allow new and beneficial interactions between consumers and retailers.
Speed – the introduction of Bitcoin into the business world makes transactions for products and services, wherever the buyers and retailers are in the world, even faster. Bitcoin transactions are broadcasted nearly instantly and are usually confirmed within ten minutes.
Cost – it’s more cost-effective for consumers and businesses to use cryptocurrencies when it comes to transactions. Services like BitPay take a flat one percent settlement charge. Whereas credit cards can take up to three percent in processing fees. Though it’s possible to accept Bitcoin without any middlemen with plugins on WordPress and Magento built websites. In the highly competitive world of ecommerce, where price is often king, the ability to reduce the cost for customers who pay in a cryptocurrency will make that e-tailer even more attractive to consumers. However, it’s essential that if you take payment using a cryptocurrency that you advertise the fact. It’s surprising how many retailers don’t highlight the available payment options which could lose them potential customers and therefore valuable revenue.
Fraud protection – cryptocurrencies help provide protection against fraud and deliver unparalleled transparency in transactions. Bitcoin payments are irreversible and secure, meaning the cost of fraud is no longer pushed onto the shoulders of merchants. The funds are locked in a public key cryptography system. Only the owner of the private key can send cryptocurrency. Also, the way the payment takes place in a decentralised blockchain provides a level of encryption that’s almost impossible to break.
With fintech banks, such as Revolut, making access to cryptocurrency simpler than ever before more people will end up holding and trading cryptocurrency. As consumers start to buy and become more comfortable with digital currencies, they will expect retailers to accept payment by Bitcoin or another cryptocurrency.
Of course, there are issues with the fluctuations in the value of cryptocurrencies, the large number of investors in the market and talk of potential regulation has impacted the value of these currencies, but the market will soon settle down. In fact, the benefits of cryptocurrencies have recently been praised by the head of the IMF.
But there are other, potentially more critical uses for blockchain which retailers should be considering.
It’s not only in payments that blockchain technologies are set to make waves in retail, but they can also and should be used for the purposes of engendering customer loyalty too.
Before that happens, retailers need to look at the bigger picture and realise that consumer interest in traditionally centralised loyalty schemes is beginning to slow. In 2017 the Colloquy Loyalty Census Report found that loyalty programme membership grew 26% in 2014, but slowed to 15% in 2016. Also, there is a belief amongst consumers that it takes too long to accrue a meaningful number of loyalty points. A report from Maritz Loyalty Marketing discovered that 70 per cent of consumers abandon loyalty rewards schemes because it took them between six to nine months to accumulate enough points to redeem rewards. Then there are a plethora of loyalty schemes on offer such as Nectar, Tesco Clubcard, Avios, etc, all offering different and often confusing reward values. It is perhaps no wonder that an estimated that $25 billion worth of loyalty points expire each year before being used.
If loyalty programmes aren’t doing their job of encouraging consumers back to shop via their favourite channel, it makes such schemes devoid of any value and an expensive white elephant for the retailer.
The success of any reward programme lies in providing valuable and useful rewards for customers that it becomes a no-brainer for them to take part.
For this to happen, big changes are needed in how loyalty programmes are structured, using the fast-evolving technology available. Instead of the traditional centralised schemes retailers need to look at providing loyalty points or cash rewards as part of a decentralised network, powered by blockchain – one that can unify the fragmented rewards space and provide meaningful rewards that can be spent or exchanged anywhere.
Offering a globally recognised cryptocurrency as the reward fits the bill nicely, something it would be as easy for users to convert into fiat or traditional currency. Consumers would have their cryptocurrency wallet or ledger in the blockchain that would automatically receive the digital money when a purchase has been made.
This is a win-win for retailers and customers. Retailers continue to attract back customers, driving revenue, while also collecting valuable data on customer trends and spend, while customers will be paid in an easily transportable cryptocurrency that won’t expire that they can spend pretty much anywhere. There are already cryptocurrencies moving into the loyalty space, such as BitRewards and Elements.
It’s worth bearing in mind that with the advent of the IoT there are set to be new ways for retailers to offer and customers to accrue loyalty points or a cryptocurrency through blockchain technology. Rewards could be paid out to consumers for browsing for more than a couple of minutes on an e-tailer’s site, or just walking into a shop, or going for a run longer than a mile – this could be a reward from a sports retailer or a health insurer.
Also, platforms such as Nucleus Vision use deep customer insight, along with proprietary blockchain systems, to help identify when a customer walks in the store and provide retailers with their buying intent along with both their previous purchase history and personalised artificial intelligence (AI) based suggestions. This enables retailers to provide a truly omnichannel and personalised experience to that customer.
Retailers must realise that blockchain technologies are the future and aren’t just restricted to currencies, so why not take the plunge now and benefit from being one of the first to offer these cutting-edge, personalised solutions to your customers.