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Cash-backs are effectively loyalty programs with the card issuer. Couldn't we replace them with merchant's own loyalty programs instead? Merchant would issue l

by DenisM 12y ago

Cash-backs are effectively loyalty programs with the card issuer. Couldn't we replace them with merchant's own loyalty programs instead? Merchant would issue loyalty points to the user, redeemable for future goods and services. They would lose money, but gain repeat business, so it's good for them. The users would get their cash-back value, so they are happy as well. For example during slow times of the year my favorite steak place kicks back 100% of the steak price, to be used by the end of the lull period (Jan 1st - Apr 15th). There could be also a secondary market for loyalty points - even if you're going home and don't plan to come back to the same Hawaiian restaurant, you could sell your points to someone fresh off the boat. Then the restaurant owner could even moderate traffic by selling/buying his own loyalty points on the secondary market, replacing groupon and their likes. Exciting stuff!

abalone 12y ago
Also a good idea. Also already exists. In various forms for decades. What would be cool is an easier way to sign up for and manage merchant loyalty programs..... but that doesn't require a new payment method. (Not sure about the secondary market though.. that seems to be an intentional choice on the part of merchants, not a technical limitation.)
- DenisM 12y ago
  I'm not saying it requires a new payment method, I'm saying it removes a roadblock to adoption of the new payment method, the roadblock you have earlier described as nearly insurmountable: "why it will have an extremely tough time replacing credit cards". Whether there is an actual incentive to such adoption, is a different question, though also very interesting.
  - abalone 12y ago
    Unfortunately it doesn't really do that. Card rewards work everywhere and are often additive to merchant loyalty programs. So a purely merchant loyalty reward based system is still a reduction in benefit from the consumer perspective.
    - DenisM 12y ago
      If merchant is paying 1.5% in CC processing fee (of which 1% goes to consumer in cash back) and has his own 2% loyalty program, switching to bitcoint-rewards(tm) they can set the kick-back at 3% making consumer whole, and pocket the 0.5%.
sanswork 12y ago
Why would I want to collect points at dozens of retailers instead of collect points at one that I can use across the board? Even with secondary markets all your doing is multiplying the effort and lowering the likelihood of ever collecting enough for a payoff.
- DenisM 12y ago
  Each merchant has a better idea of what the loyalty is worth to them, so they can offer bigger loyalty discount than a centralized payment card could. Biggest kick-back is the best kick-back! As to the management overhead, it doesn't have to be - it's all just bits. There is no reason software couldn't just sell/trade your points for you automatically.
  - sanswork 12y ago
    That would require each merchant to do the research to determine optimal loyalty rewards. Fine for very large merchants but unreachable by most small ones. End result is less loyalty systems as it is too difficult to calculate ROI for small retailers. Who is going to run the marketplace? What is their overhead going to be? It would require quite a few chain type trades because situations like you point out with getting some points on vacation would be difficult to trade otherwise. (Why would someone in LA have points for the small shop I frequent in NYC with which to purchase my points for XYZ in LA?). That's ignoring the fact that most stores would be opposed to such easily traded points as unspent points are a major boon to them.
    - DenisM 12y ago
      >Who is going to run the marketplace? Same as the bitcoin itself - nobody, it's just software (that needs to be written yet). You don't need a chain trade, just list you points for sale for bitcoins directly. There might be no one to buy it right now, but there will be someone tomorrow or a week later, who is going into that restaurant, and loads up on the points before they get there. >unspent points are a major boon to them Of course! The points must decay or expire. It would be foolish to carry debt without expiration. There is nothing complicated about deciding how big your loyalty program is going to be. Start off at your current credit card processing rates about 1.5%, and go up from there if you feel generous (like the stake house I talked about earlier), or based on repeat volume for a given customer (e.g. spend $100 get $10 back). Most places will be fine with a default for a given industry (e.g. large for restaurants, small for sandwich shops).

by DenisM 12y ago

abalone 12y ago

Also a good idea. Also already exists. In various forms for decades. What would be cool is an easier way to sign up for and manage merchant loyalty programs..... but that doesn't require a new payment method. (Not sure about the secondary market though.. that seems to be an intentional choice on the part of merchants, not a technical limitation.)

DenisM 12y ago
I'm not saying it requires a new payment method, I'm saying it removes a roadblock to adoption of the new payment method, the roadblock you have earlier described as nearly insurmountable: "why it will have an extremely tough time replacing credit cards". Whether there is an actual incentive to such adoption, is a different question, though also very interesting.
- abalone 12y ago
  Unfortunately it doesn't really do that. Card rewards work everywhere and are often additive to merchant loyalty programs. So a purely merchant loyalty reward based system is still a reduction in benefit from the consumer perspective.
  - DenisM 12y ago
    If merchant is paying 1.5% in CC processing fee (of which 1% goes to consumer in cash back) and has his own 2% loyalty program, switching to bitcoint-rewards(tm) they can set the kick-back at 3% making consumer whole, and pocket the 0.5%.

sanswork 12y ago

Why would I want to collect points at dozens of retailers instead of collect points at one that I can use across the board? Even with secondary markets all your doing is multiplying the effort and lowering the likelihood of ever collecting enough for a payoff.

DenisM 12y ago
Each merchant has a better idea of what the loyalty is worth to them, so they can offer bigger loyalty discount than a centralized payment card could. Biggest kick-back is the best kick-back! As to the management overhead, it doesn't have to be - it's all just bits. There is no reason software couldn't just sell/trade your points for you automatically.
- sanswork 12y ago
  That would require each merchant to do the research to determine optimal loyalty rewards. Fine for very large merchants but unreachable by most small ones. End result is less loyalty systems as it is too difficult to calculate ROI for small retailers. Who is going to run the marketplace? What is their overhead going to be? It would require quite a few chain type trades because situations like you point out with getting some points on vacation would be difficult to trade otherwise. (Why would someone in LA have points for the small shop I frequent in NYC with which to purchase my points for XYZ in LA?). That's ignoring the fact that most stores would be opposed to such easily traded points as unspent points are a major boon to them.
  - DenisM 12y ago
    >Who is going to run the marketplace? Same as the bitcoin itself - nobody, it's just software (that needs to be written yet). You don't need a chain trade, just list you points for sale for bitcoins directly. There might be no one to buy it right now, but there will be someone tomorrow or a week later, who is going into that restaurant, and loads up on the points before they get there. >unspent points are a major boon to them Of course! The points must decay or expire. It would be foolish to carry debt without expiration. There is nothing complicated about deciding how big your loyalty program is going to be. Start off at your current credit card processing rates about 1.5%, and go up from there if you feel generous (like the stake house I talked about earlier), or based on repeat volume for a given customer (e.g. spend $100 get $10 back). Most places will be fine with a default for a given industry (e.g. large for restaurants, small for sandwich shops).