Steve Percy
President, Diolkos Commerce Solutions
June 2022
Substantial Loyalty Programs are a large corporate offering. The cost of operating the technology infrastructure, accounting, reporting and sales processes are high which keep small businesses out of the action. And as corporations continue to grow through acquisition, control the global supply chains, and maintain loyalty not only through price but loyalty programs as well, how will small businesses survive ?
The only existing path for small businesses to access these programs is through partnerships with the large programs. “Join us…” but always remain at a disadvantage. The card networks put forth an attempt however the layers of interchange participants that need to be paid on those services make it virtually impossible to provide any sufficient value.
The three principle challenges with these programs are,
1. the issuance of awards/points,
2. the recognition of liability on the balance sheet (IFRS 15), and
3. the redemption of awards to manage that growing liability.
After all these many years, the private technology platforms and internet solutions still do not integrate well into multi-partner programs. In truth, something must be made available through the core payment infrastructure.
If at the time of any payment a customer could,
1. acquire awards as offered,
2. redeem prior awards earned
3. redeem prior awards earned in combination with cash,
4. purchase award points to meet redemption hurdles,
5. redeem award points for cash,
6. split awards appropriately between multiple payors,
7. recover awards appropriately between multiple payors if returns/refunds are processed,
8. manually issue awards to support marketing campaigns or customer service purposes,
AND,
9. any business could offer this through their current bank,
10. any consumer could easily sign up for a program, at the time of purchase,
11. any consumer could access the program from any of their banks at the time of payment,
12. consumers can see and report the balances of their programs through their bank,
13. a Self-Service model is in the original design for both consumers and businesses,
14. any business could recruit and integrate participating partners and all the infrastructure is immediately in place for service initiation and reporting,
15. businesses can easily transfer existing programs onto the new platform,
16. businesses can easily merge programs (upon business acquisition),
17. businesses can manage award expiry and depreciation algorithms as a tool to manage balance sheet liability,
18. businesses can factor/sell their programs to another program owner to remove the liability from their balance sheet (subject to regulatory rules).
AND what about,
19. cross-border award and redemptions for businesses or partnerships that operate in different jurisdictions,
20. Sanction Screening and AML/ATF reporting of all cross-border redemptions can be applied per jurisdiction regulatory requirements,
Imagine a world where local merchants could easily get together and offer a joint loyalty program “Wasaga Beach Local Merchant Rewards” and level the field against the newest big box to enter the community out by the highway. Wouldn’t it be great if they could do this and all retain their banking at their current FI ? This is what a core payment infrastructure solution can provide.
Making new payment tools such as Multi-Vendor Loyalty Programs available to businesses of all sizes will give birth to many creative businesses opportunities. New businesses will come forth and existing businesses will morph and compete in different ways.
The future can be better.
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