How airlines use the blockchain to unlock frequent flyer miles

Who does not have a small stack of loyalty points from unused airlines in a frequent flyer account? If you occasionally fly for free time, it is likely that you have not earned enough points to do anything meaningful with them, like buying a real air ticket.

Furthermore, there are laborious processes of redemption, some with twisted restrictions.

The answer could be blockchain – the technology behind bitcoin and other cryptocurrencies – which functions as a "distributed master book". With blockchain, airlines will be able to interact instantly with their partners and allow passengers to do something useful with those points.

The blockchain that the current systems are not able to highlight was recently highlighted in a white paper "Blockchain in Aviation" published in August by the International Association for Air Transport, according to which the blockchain has the ability to "tokenise" "frequent flyer miles.

This is the essence of blockchain advantage for airlines. For passengers, this "tokenization" of the points means that rather than languishing unused or forgotten, the passenger's frequent flyer points become more than a portable and accessible asset. And the biggest blockchain potential for travelers who want to redeem their points is that companies that offer goods and services in exchange for those points no longer have to be deeply rooted in the airline's reservation system.

In July, Singapore Airlines became the first company in the world to launch a "digital portfolio capacity for blockchain-based airline loyalty" called KrisPay to "help unlock the value of KrisFlyer miles to allow daily shopping at partners retail".

The secret behind this exploitation of the blockchain is the new technology developed in a proof-of-concept exercise, which the airline has developed in collaboration with KPMG Digital Village and Microsoft.

"With the blockchain-based digital portfolio, it's a simple process for participating merchants to connect with the program and for customers to shop with their symbolized miles," said Jan Reinmueller, head of KPMG's Digital Village in Singapore. "The blockchain provides a distributed ledger that records all customer transactions in real time, which ensures significant savings in terms of costs and time."

By downloading the KrisPay app, members can convert their KrisFlyer miles into KrisPay miles using the instant charging feature of the app. To make purchases, members scan the KrisPay QR code to the merchant and enter the amount they wish to pay with KrisPay miles. Eighteen merchants offering beauty, food and beverage, gasoline and retail services are already accessible and other traders will be progressively added in the coming months.

Even if you only have a few points in your account, the system "will allow members to choose to use only 15 KrisPay miles (equivalent to about $ 0.10) to pay for their purchases from partner merchants," says Singapore Airlines CEO Goh Choon Phong.

Industry experts are enthusiastic. According to Sherry Stein, senior manager, projects and innovation at the Sita aviation IT provider, the appeal of blockchain-based airline loyalty programs and the "ability to provide travelers with immediate access to their points by reducing the possibility of fraud or litigation. "

"If you want to cash out miles on car rental, for example, blockchain allows transactions to happen seamlessly and instantly, updating all stakeholders without relying on offline review and reconciliation processes," says Stein. "The key rationale for loyalty programs is to help airlines deliver differentiated value or experience that enhances customer loyalty: when we look at technologies that can help, blockchain is the perfect solution and the reason so we are closely observing how to exploit its many benefits ".

Another point of view of the sector is represented by Rashesh Jethi, Amadeus' responsible for innovation, a company that provides the infrastructure for booking airline tickets. Jethi sees blockchain opening a new world where points can be redeemed with smaller partners, rather than major international brands. "If you have a blockchain-based system, smaller and local partners could become part of the platform and offer their products and services and allow consumers to redeem points."

Jethi gives the example of a flight from London to San Francisco, where a passenger might want to visit Napa or Yosemite Park, but not enough miles to pay for a flight.

"And if I could redeem those points for a day trip to the Napa vineyards," says Jethi. "But excursions are usually run by smaller clothes, they usually do not come on a standardized loyalty platform for airlines, but if airlines are able to allow smaller and more local suppliers to join the program – using blockchain – then you could redeem your points and this would be very positive for everyone involved. "

Singapore Airlines could have the advantage of the first mover with KrisPay, but other airlines are catching up.

In May, Cathay Pacific and its reward program, Asia Miles, launched an "Unlock More Miles" campaign in blockchain. The campaign is a culinary promotion in Hong Kong where Asia Miles was accredited the following day.

In the wake of Singapore and Cathay, Air New Zealand has revealed it he was examining the uses for blockchain, including baggage tracking, retailing and his loyalty program. And in Europe, Lufthansa worked with SAP to launch an "Aviation Blockchain Challenge", encouraging startups to launchdeas around using blockchain to do things like book flights.

Regarding what British airlines could do with their frequent flyer blockchain programs – for now it is a case of looking at this space.