AISHWARY GUPTA: I think the topic is something which is like “loyalty and stablecoins.” How many of you are here just because you run a loyalty program? And how many of you are like, just because let’s see what stablecoins can do with loyalty? Well, that was the question I also had when I was writing this up. So, I want to start with a very big number, which is like, okay, let’s everyone focus on this because that’s a massive number on the screen, and that’s $48 billion. And no, it’s not a random number. It has a value for it, for sure. Which is like, that’s the amount today, every year, where you have unredeemed loyalty value. So every year, this is the money that is not lost, but this is the loyalty amount that is never redeemed, which means nobody’s stealing it from you, but the brands are stealing, or the customers are stealing, or it is not set up in a way where the end customer, who should have this as a value, he’s not getting it.

And that is something which I would try to convince you why or how stablecoins can actually go out and solve for that. So when you look at this number, and when you look at it and you say like one of the thought process for everyone, and like working with brands, one of the thing everyone says is, “Hey, loyalty is never designed to be 100% redeemed because if the loyalty is 100% redeemed, that means I have a big expense on my balance sheet.” So that’s why, or this is how, why a lot of people actually think about it, and they see it is not an uncomfortable number because we are saving on our balance sheets because someone is not redeeming it, which means the customers are not getting the final value. But when we… I think I’ve worked with a couple of brands where we realized that this was not true.

And I’ll talk about some of those use cases later on, where we have actually worked with brands to go out and solve for it, and they have seen results. And then they were like, “Yeah, this is much better. We are happy to get all our money ready.” So with that, I think this whole industry, which is like a $300 billion industry, where almost one-sixth of the value is not getting to the customers, but just remember this amount, $300 billion, because this is important from a stablecoin’s perspective, and this is like, if you look at the overall stablecoin market, the total stablecoin market cap versus this, this is a substantial number in the market. Now, why this is like just from a perspective of like when you look at loyalty, why this is like a quiet disaster? One, like if you look at it from a perspective of payment mechanism, so let’s say tomorrow I say, “We should think of loyalty as a payment mechanism.”

This is one big problem where basically what you will say is like, “Will I use a payment system where 15% of my money is lost?” The answer is “No,” because that’s why we are trying to go out and use much more efficient systems, and these efficient systems are trying to go out and get us a lot more money for our businesses at a lot lesser pricing. So there’s a lot of value evaporation that happens with the loyalty perspective. Also, like every time you stay in Marriott, how many of you staying too in Marriott just because you’re getting points there?

I too. I have been like doing that for the last one month, about to get Gold here. But like the whole point is like the value evaporation happens from a customer’s perspective, but even like it is very slow. Every time I exit out a Marriott, I’m not getting my points the moment I check out. It will take a good amount of time, and it will … The other challenge is, now when you want to go out and play this game of airlines, like I travel, I’ve done like 15 flights in the last 35 days, and that has been China Airlines, Emirates, Air India, Turkish Airlines, Virgin [Atlantic]. So now I have a lot of points and a lot of applications, and I have been like one of the worst guys who has been traveling from five years and is not in a Gold tier of any of these loyalty programs because what I do every time is I book my flights at the last moment.

So that is the biggest problem, which means every different loyalty program is getting accounted in a different fashion. They’re not connected to each other. And yeah, I’ll show you a slide later on, which is how my phone looks with downloading 200 applications to try to go out and redeem these things. So why points are broken today? One: I think brands, they are getting created in a way where, and this comes from a lot of regulatory perspective where points are something which are just unregulated IOUs. They are not a payment mechanism. So you can, like the way you tax them in different countries is completely different. Then brands can devalue them because you don’t never, or you don’t really know what is the value of those points. So basically brands will devalue that you collect so much points in many areas. I’ve seen people who have been in Marriott for collecting points for 20 years because when they want to retire, they want to actually go out on a nice, big holiday.

Well, after 20 years, your points get literally devalued. Now what do you do? You can just get pissed off. That’s it. And so that is there. And then these walled gardens, like you have so many apps that you want to just go out and download, convert those points. And then there’s these programs which were built like, “Hey, you can move this point to this point. One point is equals to one point of this different program.” Which is like, I look at a lot of these Instagram reels where these influencers are telling me, “You should have this card. You should have that card. And using those cards, you basically can move this money from this, you can move money from there,” but, hey, that’s not what we want to do as a consumer. So I think that is something which is very difficult in today’s world.

And when you just look into it, the problem is not the applications. The problem is not that I’m in an Emirates loyalty program, and that loyalty program process to get those points is difficult. The problem is how they’re interconnected, or the problem is the rails. So what if I just say that all of this was just money? What I mean by that, there’s this one look on your screen, which says, “Well, I have 25 applications, and if you look at the applications, there’s one on Starbucks, I have 207 Stars, or points, then I have another app where I have like 500, then I have another app which has like another 500, then I have another one which is 175.” Now, what are these worth?

How many of us can actually figure out what they are worth? I mean, it’s a rhetorical question, and nobody knows that. But then I go to a different slide, or a different prospect, where I just say, “Hey, I’m going to give you like $5.” And what does $5 mean? It’s in the form of a stablecoin. You can spend it wherever you want. And I can take all the flights, and I can go out, and I can leverage it very easily into wherever I want, which means I’m creating an interoperable loyalty, which also will bring it back to the questions like, “As a brand, I don’t want 100% of my redemption. As a brand, I don’t want to go out and let people fly in United Airlines, but get those benefits in Emirates.” And that’s true. So one way to look at this from a business perspective is, “I’m creating loyalty, and I’m forcing customers.”

But if you look at the pattern of people today, the Gen Zs, Gen Zs are not buying Porsches because of the brand value. They’re happy to go out and buy a Chinese car because it is giving them much more benefits at one-third or one-fifth of the pricing. So, and it’s not that there’s any quality difference, there’s a massive amount of brand value or goodwill that has been put on those pricing of those products, which is like basically taking away all your sales. So on one side, you can always be like, “Okay, I’m not going to go out and do this and keep losing because as a product, if the product is good, Gen Zs are going to use it” versus “Okay, I will go out and hold them under the whole thing of a particular brand.” And even with different brands, I think this is also important.

And one of the use cases that I did with a company called Flipkart in India, I’ll show you why even if it is interoperable, it makes sense. So why stablecoins? I mean, I tried to find everything on Google which could be good about stablecoins, and I wrote them here, which is like everything has a very good clarity like, “Stablecoins, I can see everything on my blockchain.” But then the question is: which stablecoin is it? Is it the KlarnaUSD? Is it the Circle’s USDC, or is it some other stablecoin which is issued by a brand? So, yeah, I mean, stablecoins can go out and do that, but the whole point about these stablecoins is they can become interoperable because if you remember the initial slide, I said the apps are not the problem, the rails are. All these stablecoins, even though they can be created in different brand values, but if they are following a particular act or a regulation, which means they are exactly one-is-to-one interoperable between each other.

So that is much more clear, that is much more transparent. And the other thing also is it can actually go out and get you something which is programmable. What does that mean? It means that a KlarnaUSD stablecoin can actually be redeemed by, let’s say, a DoorDash stablecoin only based on the programming that has been done between them. So they can still be interoperable, they can still move here and there wherever they want, but when you’re going out and doing that, you can actually program it for various use cases within the stablecoin. And that is what the smart contract capabilities on the blockchain give you. They’re much more flexible. They’re instant because on the blockchain, the block times are like milliseconds, seconds. They’re easy to integrate because you’re not actually integrating an entire system. You can just integrate it through APIs. The blockchains are becoming that ready today.

They’re composable. They can move from one place to another, one system to another without months and days of integration between one system and another because on the blockchain, you’re just doing a smart contract integration, which is much easier to do. And it creates a seamless way to move money. And, at the end, it is, I don’t know why says “No enterprises delays,” but it still… Sorry. Yeah. It brings a lot of that… If the Marriott program was running on stablecoins, I could have instantly, the moment I would have checked out, I would have instantly got my points within two seconds. So, what powers all these things under the hood? When you look at it from a perspective of the technicalities and like what you would have to embed into your systems, I’m just breaking it down. One: like from a purchase perspective, what are the rules that you want to create?

Which means that on a lot of loyalty programs, what you do is you say, “If you use my card, or if you use my loyalty program, if you use my product… ” Let’s say a payment product to buy a particular airline. So let’s say I’m an American Express card. American Express card says, “If you go out and buy Cathay Pacific airlines, we will give you more points, 10x points, versus if you go out and buy a United Airlines, we’ll give you less points.” So effectively, the whole thing about here is you can actually embed these rules within the system, which means the moment the contracts are going out and engaging with a Cathay Pacific, which is written in the smart contract, it will automatically create those accounting rules, and it will automatically give it to you. So you’re not accounting it at a backend. There is no software required for you to actually go out and create that backend, soft backend integration and it also gives you a very powerful tool.

I think when I was at Amex, and this was five years ago, so I don’t know what is the latest on that, but five years ago, when a brand who was associated with American Express used to actually go out and they wanted to go out and launch a particular service, or like a brand program, or like anything which has to do with like their specific programs that Amex has built for them, they had to wait for Amex to actually go out and give them approvals. Why? Because, first, Amex used to check whether they are eligible for it. Second, and the biggest fight that used to happen was, “Hey, Amex, you created this program and activated it on your website at 10:00 p.m.” And the program was launched at 12:00 a.m., but since you took 10 hours or whatever in between, any purchases that happened there is not because of you.

It is because of the organic traffic that was coming on the website. And this used to be one of the biggest fights. And I think if you guys are running brand programs, I think this for sure is a problem when it comes to like how many things were eligible for a particular program. So all these things actually from a perspective of smart contracts, you can actually go out and build those rules. It is real time so you don’t have to worry about when the program get activated. And the last thing is, when you want to create those interoperabilities, it is much easier for you to actually go out and do that. So that is one. The second thing is, now where do all these stablecoins or loyalty stablecoins reside? And that is where wallets come in. Now, wallets from a perspective of it is like something that you can just go out, integrate within your own application.

So you’re not building a new application, you’re not going out and creating a different SDK tool. You’re not doing months of work to go out and do things. It can be much easily integrated within your system to hold all these stablecoins that are coming in. So you don’t have to go through the complexities of like 2017, ’18 where you need to remember a 24-phase, seat phase, otherwise you lose everything. You don’t have to worry about, “How do I pay for those transactions?” Because all of that is extracted away. You do not need to know anything about it. It can work in as simple fashion as possible. So that is something which is the second one. And again, you can actually go out and give the ownership of these assets to the users itself, which means that in a noncustodial way, even if you are going out and creating it as a stablecoin, you do not have to go through all the licensing as well.

So I think that is where the wallets come in. And then from a settlement perspective, which is where the blockchains come in and so many blockchains in the world, I don’t want to go into how blockchains work, but so many of these blockchains which exist, you can choose any ledger. I think there is no difference in using a particular type of blockchain or not using something like that. And what, as an end result, happens is, first, in your existing loyalty programs, in general, like there will be better programs for sure, where you have like 30 days to go out and have those loyalty programs settle and make mistakes sometimes. And then you are putting out resources from a customer care perspective, trying to go out and fight, “Hey, this is not what my reward should be. My reward should be lesser, high—” Nobody will say that. My reward should be always higher and all those things.

And the second is where everything is settling onchain. The way it is settling onchain is very much visible. You do not have to have like a back account office or an accounting firm to actually go out and take care of it, and everything settles in a much faster manner. And now, I think this is one of the most important slides because the one apprehension that I said at the start was, “If I get all my loyalty programs redeemed, I am losing money, and I don’t want my loyalty programs to be so good that they can be 100% redeemed.” So here’s a way in which I want to convince you as a finance guy that this is a wise decision. And why is this a wise decision? The first one on the balance sheet, one of the biggest things, and this is working with a brand where basically when you go out and create these loyalty programs, since they’re not the expense on your balance sheet till redeemed, they effectively are treated as contingent liabilities. Too much jargon, but like very simply put, they accumulate under, not in your balance sheet, but alongside your balance sheet.

And when people redeem it, they effectively move from alongside your balance sheet into your balance sheet and become an expense item. And the problem here is one, the price is not public, the prices change. So the amount of expense in your balance sheet sometimes could be very high, sometimes it could be very low. So you do not really know till the end of the year how much you have actually spent by just looking at the numbers. As a stablecoin, when you look at this as a number, you can actually see that, okay, 300,000 token spend means $300,000 spent. The second one is it is replacing a lot more of those platforms today that are built from a loyalty perspective because you do not need the accounting. You do not need to go out and create like a proper paper trail because everything is happening on the blockchain. And since those blockchains are public blockchains, the cost of that infrastructure is not in your balance sheet. So that is the second benefit that you have.

The third on this one is also like you’re not reconciling between brands, where a lot of people who are running like massive loyalty programs are spending most of their time—in reconciliations, in going out and convincing that this is when it started, this is when it ended, this is how much it has been redeemed for. So all those things from an operating perspective are going away. So that’s the cost that you’re saving. And the third thing is, which is kind of like something that can only happen because of a stablecoin is you can actually go out and distribute the stablecoin, but you can actually go out and keep those dollars in the bank, or you can go out and buy a treasury from that particular thing, which means that all the loyalty points, till the time they are not redeemed, are generating revenue for you, which means like your lawyer… So till the time… So let’s say I go out and I have a loyalty point, which I can like, let’s say you set up a minimum, which is like, until and unless your minimum balance does not touch $50, I will not allow you to redeem it.

If you have a million people, and out of those million people, 900,000 people are achieving it and 100,000 people are never achieving it, which means you have money, which is earning yield, whatever is the yield, whichever country you are, you are earning a yield on that money till the time someone is redeeming that money, which becomes your revenue item. And I’m not saying this will completely cover all the cost of loyalty, but what I’m saying is it will go out and take care of all the expenses that you were trying to prevent by creating a loyalty system, which couldn’t be redeemed 100%. So that is, I think, one of the biggest benefits that you can actually go out and create. And it might be like if your loyalty program is set in a way, it could become a profit center. And is it easy? That is, I think, the question.

The point is from a technical perspective, 100%, but where is the biggest complexity? One, how you set up those programs. So you have to set up those programs in a way where it is compliant from the regulations perspective. The second biggest challenge is explaining. And I think I take this example often. When you look at banks, one of the reasons why when you move money through banks and it is slow is not because banks are inefficient. It is because they make their most money when the money is in their system. And that is how they make their money, which we call as “float.” So every time a bank is taking four days to deliver your money from point A to point B, they’re not doing it because they can’t deliver it instantly. They’re doing it because they are making money out of it. So the whole idea is, and when organizations become super big, now I can convince a bank that even if you go out and deliver the money instantly, you will still make more money, but the problem is the balance sheet items are divided into different people or different kind of departments.

So one department’s revenue means another department’s revenue is going down, but even though your entire balance sheet is making more money, but this person is not happy, so he will not let this person go up. So I mean, that has been one of the biggest challenges when you explain it to the brands, like how these organizational changes happen. And the question isn’t like if this happens, the question is: who are the people who are moving first? Who are the people who are already taking benefit of it? And how much time will you take to convince your organization that this is the right move? So let’s talk about who is already moving money around it. How many of you have heard of Mercado Libre?

So Mercado Libre has been running a loyalty program. I don’t know if you guys have been a part of it or not, but Mercado—and we have not worked with them on this brand position, I’m just giving this as an example because I saw it as a very good example to give—Mercado Libre, I think for a year, actually ran this program as a loyalty program without calling it a stablecoin. And now I think recently they’ve announced that they’re converting that entire program into a stablecoin program, which means they studied what people are liking. They studied what people are not liking. They did not disclose the value of it, but ultimately now they’re disclosing that value. So that is one.

The second is, I’ll take the example of Flipkart now, and this has to associate with the example where I said, or “Why should I make my loyalty programs interoperable with each other?” Now with Flipkart, one of the biggest problems—they had two big problems—one problem was that they were actually going out and the amount of vouchers that they were issuing, they were unable to redeem them, and their contingent liability in the balance sheet was increasing. So they were reaching a point that they would have reached where they would have not been able to issue any more vouchers because it was going beyond the threshold of the risk they wanted to take. So that was one challenge. And the second one was, so let’s say I’m buying an Apple phone, and the voucher that I’m getting is for a brand which is not Apple. So let’s say I’m getting a Samsung voucher. Now, how many of you who are using an Apple phone will buy a Samsung phone just because you got a Samsung voucher? I hope nobody.

Yes. So that is exactly what was happening. So it was not that Flipkart on their platform was not having people who did not want to buy Samsung phones. It was the people who were having the vouchers were not at all interested in those vouchers. So what we did, we actually tokenized these vouchers, created a secondary marketplace, and we actually went out and we said, “Whoever wants to buy…” So let’s say I buy an iPhone which is worth, let’s say, $1,000, and I get a voucher worth a hundred dollars. Now, when I get this voucher worth $100 for me, because I will never buy a Samsung phone, is zero. On the marketplace, what you could do is you could actually list it for a price. So you list it for, let’s say, $50, which means anyone who is buying that, the benefit for him is that he’s able to go out and get an additional $50 benefit from that voucher.

The person who is selling it is getting a value out of it. And even when you’re not running a program or an incentive, at that point, let’s say there is no sale, there is no Christmas sale, there’s no New Year sale happening on your platform, you are giving them an opportunity to actually go out and come to your platform because there is a random voucher in a marketplace which they can buy, and they can get the Samsung phone for $50 less. So that is where the sales increased. And we did this experiment with 45 brands from the likes of Apple, Coca-Cola, Samsung, and a lot of the other brands. And the ROI on the GMV, which is the gross margin that they were like, the gross value that they were selling, an average 16x jump foresee. As a platform, they started selling more as compared to Amazon just because people could come to their platform and they could get things cheaper even when there was no sale going on.

From a perspective of Samsung, they were able to pinpoint their user base, which everything is happening on a blockchain, which means tomorrow when you go back to the brand, you can actually prove it—that these are the actual customers I can show you onchain that have bought the vouchers. And now when you’re going to the brand to sell this as a different advertisement platform, you’re proving the numbers, you’re going out and saying, “I know exactly out of the 400 million people using my platform, these are the targeted 100,000 people who have actually bought a Samsung phone, which means next time when I’m going to go out and market your Samsung product, I’m going to go out and do that through those 100,000 people, which means I will have much targeted sales.” So overall, my whole point being that you are able to go out and increase your sales. So that is kind of like a counter to the point that, “Why should I go out and give it to some other brand?”

Then, the second one is JioBrowser. I think this is a browser that launched three years back with almost, for two-and-a-half years, it had 5,000 users. And what we did is we created this coin, which is pegged to an INR stablecoin. And effectively what we did is like we said, “Why don’t you—” And Jio, by definition, it is like the richest man of Asia whose company is Reliance, and he has like 6,000 companies running in India. So what he did is he started this with a browser. The first thing people did is like people started using it because they were getting coins, and they had no idea what these coins are. So they’re not going to the browser because they are feeling that they are getting something out of it, but they’re feeling it might have some value in the future.

So they started using it. In three months, we were able to increase the user base from 5,000 to 10 million. And then after that, what we did is like we started integrating it into all their loyalty programs or all their applications. So they have like around 700 different applications running on App Store, [Google] Play store, and everywhere, and this started percolating to all those applications. And when it started percolating to every application and the value was fixed, people realized that every time I’m using the browser and generating tokens, and these tokens I can use for going out and doing literally everything because as a brand, Reliance and Jio owns as a family business, literally everything in the country from being going to a gas station, to going out and getting a mobile recharge, to going out and getting food for your home, anything and everything. So I think that is another thing which is there.

And I think I guess you guys would be much more privy to the company called Raise, which is right now going out and instead of going out and having those loyalty points or like vouchers, they’re actually building a gift card business where they’re saying all the cash back that people will get is not in the branding name, but they will get it in the form of a stablecoin. There are a lot more examples, and I want to give them for sure, but I don’t have the time.

And one of the question for you would be like, Polygon is a blockchain, why is it talking about loyalty? So from that perspective, I think all the three examples that I gave you today, like what are the things, what are the infra that you need? So I’m not saying we have a loyalty program that I’m selling to you guys. What I’m saying is like all these things are available for you if you want to actually go out and create that infrastructure for any of your brands.

So you have the blockchain, you have the wallet, you have the payment infrastructure for us to be able to go out and deliver you the product if you want it. And this is like the line which I love the most. I don’t know how I made this up, but: “Stripe made it simple to move money on the internet, that was chapter one.

And chapter two is making it simple to move value.” And I think from Stripe’s perspective, this is also true because they are also going out and taking care of everything which is related to building a blockchain, to having a wallet, to going out and doing orchestration through stablecoins. So it’s the same thing that they’re doing, which is like where you are now, instead of just going out and making it simple to move money, you’re making the money or the loyalty program programmable, composable, and trusted. So loyalty is where that chapter starts. So very quickly, your move. I think if you’re a brand, pick one segment that is the best thing you should do. You don’t have to go out and replace everything. Pick a particular segment, run a stablecoin-based cash back. You don’t have to create your own stablecoin for that. There are 2,000 of them in the market already.

You don’t have to get your own blockchain. It’s always like 2,000 blockchains in the market already. So pick one segment, run a stablecoin cash back alongside some of your existing business or some of your existing program, and let the data decide. So you’re not actually going out and proving your management or your team that this makes sense because I said so. You’re doing it because you can have actual data which can drive that result, and you can then show it to your brand. The second is from a builder’s perspective, if you are someone who is, as a builder, you should go out and start building these products because these are the products that would become very important in the future.

And for everyone else, if you want to figure out what else can we do, I have my email ID here, so you can actually just go out, ping me on my email ID, and I’m more than happy to help you guys out.

Again, remember $48 billion. That’s every dollar, which is a broken promise from a brand perspective, and stablecoins, let us keep it. Thank you, everyone.