The prospect of a cashless society raises important
questions as the less fortunate members of society,
who often can be unbanked, could find themselves
further marginalised if a bank card of some kind
was required to access many products and services.
Western populations, with their extremely high banking
penetration and ubiquitous payments infrastructure, can
address this by ensuring that even the poorest segments
of society have access to bank cards. Some governments
are even starting to pay benefits electronically, using the
savings from electronic payments to offset the cost of
issuing cards to the individuals receiving benefits.
Merchants are also turning to loyalty cards, using the
value held in the customer’s loyalty account to manage
the relationship. Research shows that consumers
choose brands that offer loyalty rewards – and spend
more with them – over brands without, preferring store
credit over other rewards. “Basic monetary rewards
give retailers a ‘ticket to play’ in the loyalty game but
the real opportunity lies in building deeper engagement
with members through more personally relevant,
unexpected and emotional rewards,” said Adam Posner,
CEO of Directivity, a loyalty and retention consultancy.
“This plays out in the research, which shows surprise
rewards such as a gift on your birthday, exclusive offers
or special experiences go a long way to overcoming the
belief that programs don’t offer any real value.”18
These loyalty programs, for all practical purposes,
often use complementary currencies with an exchange
rate is tied to the local sovereign currency. Nowhere
is this more apparent than with airline frequent flyer
programs where members leverage the program’s
relationship with other (sovereign) currencies to create
value from nothing, such as by buying dollar coins from
the US Mint with a credit card and paying off the charge
immediately, a practice called ‘manufacturing spend’.19
The European Central Bank has classified airline miles
in the same category as Bitcoin, while The Economist
magazine valued the global stock of frequent flyer miles
at more than US$700 billion in 2005. Airlines should be
considered the central bankers for these complementary
currencies, as they can unilaterally set the exchange rate
(and devalue the points) or close accounts.
