Break Free from Conventional Loyalty Programs: The Game-Changing Power of Verifiable Credentials

As competition intensifies in today’s market, businesses are under increasing pressure to innovate and personalise their strategies to strengthen customer loyalty and stand out from their rivals. Traditional loyalty programs are increasingly failing to engage customers in a meaningful way and deliver long-term value. The challenge is clear: businesses must move beyond outdated point systems and adopt more sophisticated, customer-centric models. 

In this blog, we introduce how modernising loyalty programs with verifiable credentials can address the common pitfalls of conventional programs and unlock new opportunities, provide deeper insights for personalisation, and enhance customer engagement and sustained loyalty. 

The Current Landscape: Challenges and Drawbacks

Traditional loyalty programs typically rely on point-based systems or loyalty cards, which can be cumbersome for both businesses and customers. Points often have limited utility and can be difficult to redeem, leading to frustration and disengagement among customers. Moreover, managing these programs requires significant administrative overhead for businesses, including tracking points, issuing rewards, and preventing fraud.

Furthermore, traditional loyalty programs often lack interoperability, making it difficult for customers to transfer their rewards between different systems or platforms. This lack of data portability for customers with businesses limits the flexibility and appeal of loyalty programs, hindering their effectiveness in building lasting customer relationships.

Understanding Current Challenges through Sarah’s Experiences

Meet Sarah, a frequent traveller who is a member of several loyalty programs across airlines, hotels, and retail stores, each offering various rewards and benefits. Despite her loyalty, Sarah finds it challenging to track her points across different programs and often forgets to redeem her rewards before they expire. She is overwhelmed by the multitude of loyalty cards, membership numbers, and the complexity of managing different programs. Additionally, she feels frustrated by the limited options for redeeming her points. Her frustration grows when she realises that her points at Hotel A cannot be used at Retail Store B, even though both are part of the same group company. Sarah seeks a seamless, unified loyalty experience that offers more value and less hassle.

Sarah's experience is not unique. Many customers face similar challenges with traditional loyalty programs, leading to decreased engagement and loyalty over time. Businesses also struggle to maintain the relevance and effectiveness of their loyalty initiatives amidst growing competition and changing consumer preferences.

Key Challenges in Traditional Loyalty Programs

1. Fragmentation: Customers like Sarah often juggle multiple loyalty programs, each with its own set of rules, rewards, and expiration dates. This fragmentation leads to inefficiencies and reduced customer engagement.
2.  Lack of Interoperability: Traditional loyalty programs operate in silos. Points or rewards earned in one program cannot be transferred or utilised in another, even within the same company’s different brands.
3.  Complexity and Inconvenience: Managing numerous loyalty cards, remembering various login credentials, and keeping track of points and rewards can be cumbersome for customers.
4. Security and Privacy Concerns: Traditional loyalty programs often require customers to share personal information, raising concerns about data breaches and consented data sharing.

The Solution: Verifiable Credentials-Based Loyalty Programs

Verifiable Credentials (VCs) offer a promising solution to the shortcomings of traditional loyalty programs. Built on decentralised technologies, verifiable credentials provide a secure and transparent way to manage digital identities and credentials. By leveraging verifiable credentials, businesses enhance efficient, secure, and user-centric loyalty programs that offer flexibility and interoperability.

Here’s how VCs are used to redefine loyalty programs:

1. Unified Profile and Portable Loyalty: With VCs, Sarah can consolidate all her loyalty points and rewards and convert them into portable digital credentials. This unified approach means she no longer needs to carry multiple loyalty cards or remember different login details. Her points from Store A can be easily used at Store B, enhancing the overall shopping experience.
2.  Interoperability Enabled: VCs enable seamless interoperability between different loyalty programs. Retailers and brands can form alliances, allowing customers to use their points across various programs. This not only increases customer satisfaction but also fosters brand loyalty and provides cross-promotion opportunities.
3. Simplified Management: Managing loyalty points and rewards becomes straightforward with VCs. Customers can access their consolidated loyalty information through a secure digital wallet. This reduces the complexity and inconvenience associated with traditional programs.
4. Enhanced Security and Privacy: VCs offer robust security features. Customers have control over their data, sharing only what is necessary for redeeming points, aligned with their privacy values. This decentralised approach minimises the risk of data breaches and enhances customer trust.

Sarah's Journey with Portable Loyalty

Sarah will be delighted when she discovers a new loyalty program that uses verifiable credentials to offer portable rewards. With this innovative program, Sarah can seamlessly redeem rewards, track and earn points across a network of participating businesses, regardless of industry or location. Her points are securely stored in a digital wallet, accessible from any device, and she receives real-time updates on her balance and available rewards. Additionally, this program addresses her concerns about data breaches and privacy, as it requires her to share only the necessary information for redeeming points, aligned with her privacy values.

Sarah no longer worries about missing out on rewards or struggling to track her points. The portable nature of the loyalty program allows her to effortlessly transfer her rewards between different businesses, systems, and platforms, enhancing her overall experience as a loyal customer. Moreover, businesses benefit from increased customer engagement and loyalty including reduced administrative costs associated with managing traditional loyalty programs.

Unlock New Possibilities

Verifiable Credentials-based loyalty programs unlock many new possibilities for businesses and customers. By leveraging decentralised technologies, businesses create transparent and secure loyalty ecosystems, based on trust and loyalty with customers. Additionally, the interoperable nature of these programs enables seamless collaboration between businesses, allowing for innovative partnerships and joint rewards initiatives.

Customers can choose which credentials to share with businesses, reducing the risk of data breaches and identity theft.

How VCs Overcome Current Solutions’ Limitations

• Boost Efficiency and Increase Customer Engagement

Traditional loyalty programs often suffer from low engagement due to their complexity and the effort required to manage them. Customers may forget to use their loyalty cards or miss out on rewards due to expiration dates. With VCs, the process is streamlined, and customers can easily access and use their rewards, leading to higher engagement and satisfaction.

• ·       Foster Interoperability and Collaboration

Current solutions often operate in isolation, with little to no interaction between different programs. VCs break down these silos by allowing interoperability and collaboration between different brands and retailers. This interconnected approach creates a richer and rewarding experience for customers.

• ·       Enhanced Security

The centralisation of data in traditional loyalty programs poses significant security risks, as data breaches lead to the loss of sensitive customer information.

VCs, on the other hand, use decentralised technology to enhance security. Customers have control over their data and share only essential information with businesses. Businesses, in turn, use verified or validated information in the loyalty program.

The Benefits of Portable Loyalty Programs

• Customer-Centric Experience

Portable loyalty programs place the customer at the centre. Sarah, for instance, enjoys a seamless experience where all her loyalty points and rewards are consolidated in a single digital wallet. She can use her points across different stores and platforms, enhancing her overall shopping experience.

• ·       Increased Brand Loyalty

By offering a flexible and user-friendly loyalty program, businesses foster stronger brand loyalty. Customers value the convenience and enhanced benefits, resulting in higher retention and advocacy.

• ·       New Business Opportunities

Interoperability and collaboration between different loyalty programs create new business opportunities through strategic alliances, joint promotions, and cross-selling products, thereby increasing revenue and customer engagement.

Getting Started with Verifiable Credentials for Loyalty

Recognising the benefits of verifiable credentials for both businesses and customers is the first step, but understanding how to implement them is crucial for the developer building for the businesses. Fortunately, organisations like the World Wide Web Consortium (W3C) and the OpenID Foundation - both non-profit organisations; are laying the groundwork for data portability and secure data transaction by developing relevant frameworks. These frameworks can be utilised to bring data portability to life:

• Verifiable Credentials Data Model v2.0 (w3.org): Portable Data model
• Decentralized Identifiers (DIDs) v1.0 (w3.org) : Portable identity framework
• OpenID for Verifiable Credential Issuance - draft 13: Portable data issuance framework
• OpenID for Verifiable Presentations - draft 20: Portable data presentation framework

Understanding and implementing these frameworks may seem daunting if you haven't encountered them before. The good news is that many organisations  and businesses have started adopting them, and there are numerous implementation examples available, the latest being the European Digital Identity. You can find more details here: 

European Digital Identity Architecture and Reference Framework – Outline | Shaping Europe’s digital future (europa.eu).

At Affinidi, we are bridging the gap by bringing together these new frameworks for you to leverage their benefits. The Affinidi Trust Network (ATN) – built on privacy-preserving open standards – offers easy-to-integrate tools that simplify implementation and streamline complexities associated with secure identity management, authentication, and data portability.

An integral part of the Affinidi Trust Network is the . By enabling users to control their data, we allow them to discover, collect, store, share, and even exchange their data for value. Refer to the example below that showcases how portable data is issued and shared while enabling users to be in control of their data with Affinidi Vault as their personal data store.

By leveraging the Affinidi TDK (Trust Development Kit), businesses can issue portable loyalty credentials using OpenID for Verifiable Credential Issuance (OID4VCI). Businesses can also use the Affinidi Iota Framework to request user data stored in the Affinidi Vault, such as loyalty points, with OpenID for Verifiable Presentation (OID4VP). Users, in turn, utilise their Affinidi Vault to share the requested data with their consent

Resources to Get Started

Developers begin your development journey with the Affinidi Portal. This provides a unified platform to manage login configurations and leverage the Affinidi Trust Network to build secure and transparent data interactions for your applications. 

• Find the Affinidi TDK associated libraries and clients here: affinidi/affinidi-tdk: Affinidi Trust Development Kit (github.com)
•  For a detailed implementation guide, explore these reference apps: Integrate Affinidi Login: Across Languages and Frameworks | Documentation 

These resources also enable frictionless customer onboarding journeys for your loyalty program.