Below is a summary of how Loyyal’s modular technology can be leveraged to enhance and extend existing Loyalty Management Systems, adding several key benefits.

Three Key Value Propositions

1. Increase Partner Value & Customer Experience (immediate)

• Faster onboarding can generate more profit from larger base of relevant partners
• Streamlined Reconciliation & Settlement to reduces operating costs
• Simplified data sharing, with greater security between Partners with near-zero IT time & effort

2. Enhance Marketing Capabilities (near term)

• Develop broader insight into Member behaviors, even across Partner programs
• Target promotions more accurately, and in near real-time
• Enable Multi-program promotions more easily, with shared liability

3. Reduce Program Liability (long term)

• Calculate true cost basis of any Point based on where/how it was earned/redeemed
• Redeem most profitable points/miles first, versus legacy FIFO approach
• Trace and manage program currency through its entire lifecycle

Why Loyyal?

At Loyyal our unique competitive advantage is in our full production product suite that is optimized to extend and enhance our clients’ existing loyalty management infrastructure and investments.  The core functionality of our product suite features private channels, smart contract management, database architecture, identity management, and administrative tools. From our continuing assessment of the industry-at-large, and direct feedback we get from clients and prospects alike.

Proposed POC/Workshop/Pilot Scope for Client Engagement:

Step 1: Understand business value proposition via this document

Step 2: Workshop to define Pilot and KPI’s

Step 3: Draft SOW defining Pilot details, responsibilities and budget

Step 4: Light integration Pilot with subset of airline loyalty members and current partner

Step 5: Pilot success determined based on KPI’s

Step 6: Production decision

Key Benefits Identified:

• Seamlessly and automatically credit rewards to customers.

• Because all partners who have a financial interest in transactions will have shared and transparent access to the same ledger there is no need to confirm and reconcile before validating points.

• Privacy and address data concerns – maintaining, storing and securing the data, as well provide measures to prevent fraud or human errors.

• Minimal-to-zero manual processing required to reconcile transactions between partners
• All actions are transparent for all partners involved in a transaction, reducing the chance of human error or fraud.

• Data provenance and clear audit trials

• Transparent and immutable shared ledger to store and show provenance.

• Instant crediting and debiting of reward currency.

• While  can be possible today with traditional centralized databases, the difficulty increases significantly  when reward currency is eared or redeemed via partners or currencies in an alliance program, and continues to increase as the number of partners grows.This typically leads to inconsistent member experiences where some award earning or redemption transactions are reflected in their accounts quickly, while others can take weeks, or even months. Both of these challenges are solved by a shared ledger for transparent value transfer between multiple partners.

• Digital Wallet that allows members to manage their reward currencies and can interact with existing loyalty rewards program platforms through smart contracts.

• This is inherent to our technology stack as described above.

• Potential solution, with adequate digitalization, to integrate disparate programs to an interlinked loyalty network with a protocol to provide easy way to collaborate with business entities and partners, which will address the primary cause for loyalty reward programs’ lag times between reward points being made available in a manner that affords customers opportune moments to use them.

• This is the fundamental value propositions enabled by Loyyal’s platform and Network. Allowing a partner to issue or redeem rewards currency on your behalf is essentially giving an entity the ability to make balance sheet transactions on behalf of your loyalty program. Because of the trust required to enable this type of tightly coupled business partnership, the integration and maintenance is prohibitively expensive using legacy loyalty management approaches. Loyyal’s  distributed ledger platform removes this requirement and significantly reduces  the cost required to establish and maintain those transaction flows between partners.

• Scalability and Interoperability

• This is inherent to our tech stack as described above.
• Our network architecture is designed to scale horizontally, and can even enable the prioritization of replication between Peers, thus eliminating the transaction replication latency prevalent in public ledger approaches such as Ethereum.  Our current implementation enables us to maintain a benchmark of the replication of hundreds of transactions per second, with almost no regard of the number of Peers.
• Since its genesis, our architecture has been designed to be both Ledger, and Cloud agnostic.  While our current Ledger implementation is deployed based on Hyperledger Fabric v1.06, its relevant to understand that early test implementations of Loyyal’s technology were deployed on the Ethereum.  We have explored using additional underlying ledger technologies, and can facilitate this based upon customer demand. Importantly, this same design approach enables Loyyal to interoperate between the inevitable, multiple blockchain solutions that will ultimately exist within an enterprise, in areas such a supply-chain management, or even other blockchain applications that must be interoperated with at any partner programs.  Lastly, we are currently deployed on a combination of IBM Cloud and Google Cloud Platform.

This document illustrates an airline example of the financial value that using Loyyal’s blockchain technology, and network are delivering for our clients today. The values used are for illustrative purposes and do not divulge confidential costing or pricing data of our clients.  Excluded from this analysis are the unknown internal IT operating costs of our clients’ legacy Loyalty Management Systems.  Also excluded are projected costs of licensing and operating Loyyal’s Product Suite, as customized implementations, as well as transaction volume levels differ greatly from one client to another.

Use Case: Air Carriers - Loyalty Partnerships

Overview

Most large-scale loyalty programs, particularly in the Travel & Hospitality market sector, have an inherent need to offset relatively infrequent member engagement with additional earning & redemption partners.  These additional partners provide additional engagement opportunities for members to earn mileage credit outside of the flight itself, as well as provide program liquidity when the member chooses to utilize their saved miles for something of relevance, and value, other than a redemption fare.

Further, adding relevant earning & redemption partners with a strategic focus on the exchange rate between the program and the partner will actually decrease program liability at a preferential rate, thus contributing to the overall profitability of the carrier’s loyalty program.

Among the challenges that carrier programs currently face are the limitations on the technical, and financial integration of new partners.  Outside of Loyyal’s solution, no two partner programs store or communicate transaction data in precisely the same way, thus each requires some degree of bespoke engineering, even if for nothing more than customized data extracts or reporting.  Similarly, come month end each partner’s transactions must be reconciled by the Finance team and a month-end settlement arrived at, invoiced, and executed between partners.    

Cost Factors & Assumptions

The primary elements that contribute to the current cost model are:

Number of Program Partners

The total number of total earning and redemption Partners estimated to be integrated with the carrier’s loyalty program. For our purposes here, we also factor in an annualized growth rate, representing the anticipated organic increase in the number of partners.

Average IT Man-Days per Partner Integration:

These costs encompass the work effort necessary to complete the following:

IT Discovery; joint discussions and knowledge exchange between Program and Partner team.

Integration Design, Development, Configuration, and Testing; Design of whether the partner interface will be a live interconnection between systems, or batch-processing, along with development of any custom integration interfaces, onboarding efforts for potential account credentialing or onboarding for secure access to data (i.e. secure, unique API keys specific to a particular partner are generated and exchanged). Testing and trial execution of the integration.

Average Man-Days for Reconciliation & Settlement, per Partner:

Here we are estimating the average number of Man-Days consumed by the carrier’s Finance team to handle month-end Reconciliation and Settlement between the Program and a given partner, per month.  In a non-Blockchain based implementation, this variable has to allow for the following sub-elements:

• Generating a Reconciliation report from the Loyalty Management System
• Transference of Reconciliation reports between Program & Partner
• Comparison analysis of respective Reconciliation Reports
• Adjustments between Program and Partner (which will typically involve generating additional Reconciliation reports)
• Generation of invoices & statements
• Generation, approval, and execution of payment.

Assumed Man-Day Rate

While human resource costs can vary significantly from territory to territory, for the purposes of these exercises we are assuming a blended rate based upon a mix of senior, mid-level, and junior staff associated with the management oversight, as well as the execution of the tasks above. To arrive at a Man-Day rate for this blended staff mix, we are assuming an averaged, annualized salary of USD $110,000 to be conservative, with a 25% burden rate applied to account for benefits, and allocated operational overhead. This results in an assumed rate per Man-Day of approximately USD $375.

Program Partners Growth Rate

For these calculations, we are assuming a flat annual growth rate in the number of earning & redemption partners of 25% year-over-year.  
 

Cost Factors Not Included:

Due to the variability involved, these two factors were not computed in the resulting costs, or revenues:

Missed Revenue per Month:

This factor would attempt to measure the lost revenue opportunity for each month that a selected Partner is not integrated into the Carrier’s Program. Let us assume for example that a Hotel partner has a negotiated Exchange Rate of .75x the cost basis of a carrier’s own internal cost basis for a mileage redemption.  If we project an Average Rate of Redemption (ARR) at which members select to redeem their miles with the Hotel partner, one can project the lost revenue (liability offset) opportunity to the carrier program for each month that the new Hotel partner’s integration is delayed.

NPV of Accelerated Settlement

An additional cost factor not included in these estimates relates to the speed at which Settlement can be processed and the Net Present Value of having funds collected, in some cases months faster than under normal circumstances today.  Too many unknown factors contribute to determining the NPV of such cash flow to the carrier, for us to estimate it with any degree of confidence.

Pre-Blockchain Costs

Partner Integration

In this scenario, the carrier’s IT costs for onboarding a new earning & redemption partner is estimated to be as follows:

Reconciliation & Settlement

In this scenario, the carrier can look at the estimated costs being based on the following averages:

Post-Blockchain Projected Savings

Using Loyyal’s Product Suite, and Network, the carrier will shift the majority of the efforts related to earning and redemption partner onboarding to the partner themselves.  Additionally, the carrier will significantly reduce the Man-Days spent on Reconciliation and Settlement simply through the existence and shared use of the common Distributed Ledger on Loyyal’s network.

Partner Integration savings projections are as follows:

* Note: Earning and Redemption partners continue to be added to Loyyal’s network as an extension of the onboarding of other client’s loyalty programs to our platform.  Thus, these Man-Day estimates can be reduced significantly further should the carrier choose to partner with partners already integrated on Loyyal’s blockchain and network.

Reconciliation & Settlement Savings Projections