A Deloitte Research Report, “Making blockchain real for customer loyalty rewards programs” found that using blockchain technology can help build brand loyalty by delivering real-time updates, facilitating tracking of goods, providing security & reducing costs.

According to the Colloquy Loyalty Consensus Report market research shows that “55% of consumers spend higher amounts and increases purchase frequency due to loyalty initiatives.” This makes developing a loyalty rewards program a revenue driver for brands in today’s online economy.

The Poste Italiane Group—with its banking services, partnership with merchants and logistics across a wide supply chain—sits in the middle of the loyalty ecosystem.

Poste Italiane began working with the loyalty programs in 2017 when, in partnership with SIA, it created the Extra Sconti App that enables cost savings to debit card holders that also use Postepay cards. Instead of starting with a network of big shops, it created a platform called Sconti BancoPosta that initially served over 30 thousand small merchants and soon grew to other well-known brands. The cashback system rewards users with money deposited directly into their account for purchases of brands recommended by the app.

“The reality is that it is seven times more expensive to acquire new customers than retain existing ones, and over half of us are motivated to spend more and increase the purchase frequency due to loyalty initiatives,” Vernini shares.

As the center of commerce & online transactions, Poste Italiane wanted to support the companies within their supply chain with customer acquisition and retention. They also wanted to encourage customers to engage with the merchants and follow their recommendations or accept offers through them.

Poste Italiane saw this as a big opportunity in the market. The traditional postal system is bound together by an expansive and complex supply chain. This results in tech sprawl where there are way too many programs and they are not interoperable. This means the programs can’t communicate with each other and share data. With the plethora of programs and lack of interoperability between them, the management of the accounts and the rules on earning rewards are not clear. What makes Poste Italiane’s service delivery platform stand out is the creation of a single point of access to multiple loyalty schemes and formation of a loyalty point exchange.

Building a customer loyalty program based on blockchain

It is common for customers to log into an airline miles/rewards account only to see they’re 100 miles shy of a travel reward. The Poste Italiane solution lets customers combine points from different programs to reach the threshold required to purchase the rewards, making it a truly customer centric approach. When customers only accrue points with one merchant, the value of those points are limited. Loyalty becomes much more worthwhile when the points can be bundled together so that they become interchangeable and benefits can be drawn from many places. With more points compiled, consumers can take advantage of more rewards. In a way, one can think of Poste’s loyalty points as a shop-issued digital currency where exchange rates set by the participating merchants.

The blockchain platform developed by Poste Italiane is fully decentralized with each partner running its own node. If a partner does not have the technical or financial capabilities, or interest in hosting one themselves, Poste Italiane can provide a node that the partner can manage. Because each partner needs to either contribute their hardware or pay for a node to be run on their behalf, everyone has vested interest and shared responsibilities to create a healthy ecosystem. Blockchain levels the playing field for everyone in the Poste Italiane network. Merchants get access to a complete loyalty service, including the ability to set up new campaigns and provide points and loyalty rewards to clients.

Without blockchain’s distributed ledger structure, a loyalty program typically reconciles on a periodic basis. With blockchain technology, customers can compile their points in real-time for more immediate rewards.

The idea to create a loyalty platform came from Poste Italiane’s interest in using DLTs as a single source of truth and proof of authenticity on information, as well as drive to experiment with tokenization. This use case was a great POC to test automated reconciliation between services where Poste plays an intermediary role. Out of many DLTs, they decided to build the POC using an Ethereum network. While the possibility of running their platform on a public blockchain was a factor, it was even more important to be able to connect to a permissioned system.

The development started with Quorum from ConsenSys. However, quite quickly, the team decided to move to Hyperledger Besu “because we are part of the Hyperledger Family,” jokes Vernini. “We had good reasons to become part of this family, though.

Hyperledger Besu offers users the benefit of connecting Hyperledger and Ethereum. With Hyperledger Besu, organizations can easily configure Ethereum according to their needs while enabling smooth integration with other Hyperledger projects.

What is left, as Verninini admits, is probably the toughest part: moving from an internal Proof of Concept (POC) to a national production platform. “Blockchain projects like this require a completely different mindset and an openness to innovation and collaboration, even with your competition. Lack of education, fear of complicated technology, no clear Return on Investment (ROI) calculations and bringing in players outside of your organizations are the main obstacles.”

Nevertheless, Poste Italiane’s appetite for expanding their DLT usage is growing, and the loyalty platform is not the only project underway. “We are now working with other Italian public agencies and organizations to build an Italian blockchain infrastructure that could be fully interoperable with the EBSI infrastructure that is under development by the European Blockchain Partnership,” shared Rosario De Chiara, Project Manager at Poste Italiane. “We will be building a platform that will enable Italian companies to connect to EBSI. Once again we will be using Hyperledger Besu.”

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