Floyalty – Shaping the future of customer loyalty

THE NEXT GBI REPORT IS OUT!

Customer Loyalty on the blockchain has a new name: Floyalty. Thanks to our Austria Hub lead Stefan Schürz we present a concept for customer loyalty programs leveraging the power of a private permissioned blockchain.

After taking a closer look at existing customer loyalty programs Stefan identified lack of engagement and missing interoperability as main challenges. In his concept for a better customer loyalty program Stefan has developed a decentralized network that utilize different tokens and variable tokenomics to activate participants and create a leaner experience that puts the interest of the customer first and hence generates massive value for brands. 

“According to the existing research presented, it seems to be obvious that loyalty program providers need to start reshaping their programs sooner than later in order to be well positioned for the future and that novel customer-centric approaches are definitely needed to reimagine customer experience and meet their retention goals.”, says Stefan

Abstract

According to recent studies it is apparent that current loyalty programmes are facing issues on either the customer’s and the companies’ side and are hence far from realising their full potential. By building on that this report proposes the potential blockchain based startup project Floyalty, seeking to shape the future of customer loyalty fuelled by innovative blockchain technologies. Through following an entrepreneurial Lean Startup and business model funnel approach, a proper starting point for the possible realisation is prepared and documented, beginning with the creation of a solid foundation of the problem, customer and solution assumptions. The identified problems were examined in detail and further broke down, including the complexity and fragmentation of existing programmes, liabilities arising from unused loyalty points as well as a lack of consumer data and personalisation.

A first iteration of creating a complete business model based on the Lean Canvas method was conducted covering among other elements an in-depth problem-solution mapping, first Persona compositions for outlining identified customer segments (programme provider and customer), as well as the definition of a concise value proposition. Then a dedicated User Centred Design process is presented, which includes building prototypes on different levels up to a Minimum Viable Product, in order to provide further proofs of concept as soon as possible through the continuous involvement of end users in the course of the development aiming to ensure an outstanding User Experience thus helping to reimagine customer experience.

In this context the potential application of blockchain technologies was investigated in detail discovering benefits related to increased flexibility in terms of connecting different loyalty programmes across retailers, especially in terms of convertibility and exchange of loyalty points, together with an unprecedented traceability originating from tokenisation. In addition, benefits associated to cost reductions, faster transaction and reconciliation times, as well as enhanced data security compared to existing legacy systems could be found.

As a result, the potential identified and described solution consists of the introduction of an easy-to-use permissioned blockchain platform, to integrate and interlink different loyalty programmes and rewards offered by retailers. Attribute-based access controls are used to provide the necessary flexibility and granularity related to control and privacy for managing access, based on predefined roles of Floyalty users. Furthermore, the Proof-of-Authority consensus mechanism is implemented, thus featuring a high-risk tolerance, while leading to superior performance related to the number of transactions per second along with predictable time intervals for generating new blocks.

Floyalty implements unique features including the promotion of customer empowerment through a dedicated voting engine realised through the secure, trustless, automatic deployment of tokenised voting rights granted to customers to directly participate in decision-making, thus helping retailers to further optimise their product portfolios to customer’s wishes and needs. Moreover, the transparent and accountable donation of accumulated loyalty points to selected charitable social- and sustainability projects, as well as comprehensive options for customers to share their data are featured. Therefore, Floyalty takes on a novel approach in its proposed conceptual architecture by smartly combining existing and successful state-of-the-art elements of diverse blockchain based projects and solutions, thus creating an unprecedent forward-thinking loyalty platform.

To this extent, blockchain technology serves to guarantee the immediate and secure creation, redemption and exchange of individual tokenised loyalty points across programmes, companies, and industries through a trustless environment by means of Elliptic Curve Cryptography based proofs. Verified automation is realised through the broad application of smart contracts, which are implemented with the advanced language Pact. Thereby, ensuring enhanced security by significantly reducing the presence of any potential attack vector due to Turing incompleteness, while being in a human-readable format for easier public verification and offering a specific update mechanism for easy revisions and improvements, together with a tool for formal verification of its code.

On the Floyalty platform the customer is given full ownership, security, privacy and control of their shared private data along with transparency of related data activities, thus providing superior compliance with the European General Data Protection Regulation. Therefore, private data is encrypted, uploaded and stored off-chain while having the keys registered on the blockchain. Erasure coding technology is used and data is stripped across various servers to ensure performance and reliability. A special Proxy Re-Encryption technique is implemented, thus enabling the customer to safely and efficiently share selected encrypted data sets with each loyalty programme provider on an individual basis in order to access their data, download and process it, while having all corresponding actions recorded immutably.

Keywords: blockchain; customer loyalty; entrepreneurship; use case; new business models

About the Author

Stefan Schürz

Stefan Schürz, based out of Linz, Austria is Chief Research Officer at a non-profit research organisation and for more than 10 years professionally involved in research, development and organisation of methods, concepts and products that enable and support people with disabilities and people in third age to participate in society.  Together with his team, he generates the best possible results from innovative projects using state-of-the-art technologies while adapting to new insights in an agile manner. In project management in particular, Stefan uses his skills to build and lead project teams, while functioning as an interface between product development and end users. By continuously keeping the finger on the pulse of users’ needs and thus coordinating the development department with their requirements, he succeeds in designing solutions that feature great User Experience and enable participation.

Stefan holds a Master’s degree in Blockchain Technologies, a Bachelor’s degree in Medical Engineering as well as an international certification in project management.