Stablecoins are devouring the membership point program.

Foreword

A few weeks ago, when I was checking out at the supermarket, the cashier asked a routine question:

“Sir, would you like to exchange your reward points?”

I agreed and look forward to getting some discounts.

She typed on the keyboard for a few seconds, then looked up and said: “Your points balance is 0.70 dollars.”

I have been using that membership card for almost a year.

Rather than being disappointed, it's more amusing. I spent an entire year shopping for groceries, and what I got in return was… a piece of chewing gum. And not even the big pack kind.

That moment reminded me of all the membership programs I had ever joined: airline miles always falling just short of enough to redeem for that flight you truly want; restaurant stamps that I always forget to bring; credit card points that, after you’ve spent nearly $1200, proudly tell you that you’ve “unlocked” a $20 voucher. Most of these programs feel like they were designed for another era, meant for customers with infinite patience who would never use a calculator.

Strangely, membership reward programs are everywhere: coffee shops, airlines, banks, pharmacies, food delivery apps, and so on. However, they are not compatible with each other. Each brand wants to keep you loyal, but only within its own ecosystem. As a result, your value is trapped there. Points cannot be transferred, rewards cannot be expanded, and the points you earn often cannot be exchanged for anything truly valuable.

At the same time, our methods of payment and fund transfer have undergone a tremendous change in the background. Whether it's instant domestic payments or cross-border transfers, everything has become faster, more open, and more globalized. However, amidst all these changes, stablecoins have emerged: they are digital versions of the dollar, possessing currency-like functions, yet requiring no waiting, unrestricted by national borders or bank operating hours.

It is unclear when a new idea began to quietly infiltrate the discussion about loyalty: what if loyalty didn’t require points at all? Instead of giving you points of questionable value, why not reward you with real, spendable digital currency? This digital currency won’t disappear after 90 days, doesn’t require 40 redemption conditions, and won’t force you to purchase anything from the store that originally issued it.

This article will delve into how stablecoins can completely replace point systems. Let's get started!

Points are not rewards, they are liabilities

The interesting thing about membership point programs is that they appear very attractive on the surface. You can earn points, enjoy some benefits, and occasionally redeem something. However, in reality, the structure of these programs has not truly kept pace with people's consumption habits and the operational models of businesses today.

First of all, points are not rewards, but liabilities.

Every point issued by the company will be recorded as an amount owed to you in the future. This means that the membership points program is not just a marketing tool, but also an accounting commitment. For example, airlines manage billions of unused miles, which naturally compels them to strictly control the points system rather than being overly generous.

The second issue is that each brand's membership system operates on its own independent architecture. Each brand maintains its own ledger, rules, and backend systems to manage rewards. They do not share technology, the value settlement methods are also different, and there is no connection between them. Therefore, the rewards you earn will ultimately remain on the platform to which they originally belonged.

Ironically, the entire system actually relies on the depletion of points to maintain its operation.

The abandonment rate refers to the proportion of points that people have never redeemed. In various industries, most points go unused. In many sectors, 30% to 40% of reward points ultimately go unclaimed until they expire. Companies take this into account when designing programs, as the economic benefits would be drastically different if everyone redeemed all the points they earned. However, unused reward points sitting idle do not create any value; they do not circulate, generate income, or strengthen relationships with customers. They are merely a liability. Thus, loyalty programs become mechanisms that brands maintain out of habit and expectation, rather than truly beneficial systems for both parties.

What is the source of today's reward funds?

If you study today's reward calculation methods carefully, you will understand why membership point programs operate in this way. Most membership point programs - whether for banks, airlines, retail chains, or food delivery apps - are built on the same simple question: “Where do we raise funds to reward users?”

For banks and card issuers, the rewards come from transaction fees, which are the costs merchants pay each time a card is swiped. After each party in the payment chain takes their share, the remaining portion belongs to the bank and is used for cashback and points. If the net profit margin is between 1.5% and 2%, the bank may decide to return 0.5% to 1% to the user, while the remainder is used to cover fraud risk, benefits, and operational costs. This is why credit card rewards look roughly the same around the world.

Airlines adopt different business models, but face similar constraints. Their frequent flyer programs do not rely on your every flight to sustain operations, but rather generate revenue by selling miles to credit card companies. These miles eventually enter your account, but initially are just an expense in the partnership agreement. Since this revenue needs to cover various aspects such as operations, redemptions, flight delays, and customer service, airlines strictly control how and when miles are used.

The reward funds for retailers and chain food stores usually come from thin profits. If a grocery store can only earn a few cents for every dollar sold, then it cannot afford too many rewards, or it will offset its own profits. Coffee shops and restaurants face the same problem. While getting a free drink after ten purchases is certainly delightful, in reality, it is only because the profits from the other nine purchases are enough to cover the costs.

The situation faced by applications and e-commerce platforms is more complex. Their profit margins are extremely low, so they often share the costs of rewards with merchant partners. For example, a food delivery application offers a $3 discount, and the restaurant needs to bear part of the cost because the application's own profits are insufficient to cover the entire discount. Ultimately, the reward mechanism can only operate effectively if all parties agree to share the costs. If any one party withdraws, the entire reward program will fail.

In all these industries, the themes are largely similar. Rewards come from the profits of certain individuals. They are provided from the little economic profits left by enterprises after paying for operational expenses, partnerships, and underlying payment infrastructure. This is why loyalty points programs, while ubiquitous, often tend to be monotonous: points accumulate slowly, redemption options are limited, and terms are complex.

Every penny you earn is the remainder after a series of costs have been deducted. Moreover, since every dollar of reward depends on others relinquishing a portion of their profits, loyalty is also limited.

What is a new type of reward system based on stablecoins?

The limitations of today's loyalty points programs are simple: the funding to keep these programs running must come from the profits of certain companies. This is why every industry—banks, airlines, retailers, applications—encounters the same bottleneck. The generosity of the system depends on the economic benefits behind it. However, in recent years, the situation has quietly reversed. The operating costs of payment channels have begun to decrease, settlement speeds have increased, and they can directly carry value without lengthy intermediaries. As payment channels become more streamlined, the systems built upon them naturally change as well.

This is where stablecoins come into play; it is not a new member reward mechanism, but rather a completely new foundation for capital flow. Stablecoins are not issued as rewards; they are essentially digital forms of the dollar, which makes their economic operation fundamentally different. Most large stablecoins hold reserves in short-term U.S. Treasury bonds, which currently have an annual yield of about 4% to 5%. This is real and predictable income generated from underlying assets, not from promotional or marketing budgets. When holding billions of dollars in such assets, even a 1% yield can translate into substantial income. A small portion of this income can be returned to users, meaning that rewards do not have to be fully drawn from the already thin profits of merchants.

Today, value needs to go through multiple layers - merchant fees, card organizations, payment processors, before the final consumer can receive the remaining portion. In the new model, rewards begin early in the process. The reserves backing stablecoins generate returns, part of which can be used for incentive mechanisms. Since payments and rewards operate on the same track, the entire process becomes much simpler. There is no need to worry about accumulating liabilities in the backend, no need to worry about users forgetting to redeem points, and no need for a complicated partner network to ensure the availability of value. The track itself creates space for the existence of rewards.

Moreover, because the payment channels are open, the value does not have to be limited to a single application. If a user earns a few dollars in stablecoins, this value can be immediately transferred to their wallet, used for other purchases, or deposited into a savings account, without the need for custom integration or a closed ecosystem. The way rewards are used is similar to things users are already familiar with, without needing to redeem them through a separate interface.

In summary, this model does not replace the membership points system, but instead eliminates the need to operate the membership points system as a large and independent system. The rewards mechanism is integrated into the payment process, no longer requiring an additional program managed through a separate ledger. This reduces the burden on businesses, enhances the user experience, and no longer relies on idle balances to maintain operations.

My Thoughts

The reason this transformation feels real is that it is no longer just an idea. Many companies have started to move in this direction. Klarna, one of Europe’s largest consumer payment institutions, with an annual transaction volume exceeding $80 billion, recently launched its own stablecoin. Soon, the funding for its membership loyalty points program will no longer be limited to credit card network fees and merchant discounts, both of which are very expensive.

The stablecoin issued by Klarna can completely change this model. Klarna can settle transactions at low cost without going through traditional payment systems, and hold user balances in assets with an annual yield of 4-5%. This portion of the income can subsidize rewards, reduce project costs, and decrease reliance on transaction fees.

It is still too early to draw conclusions, but such initiatives indicate the direction of future development. Once the payment layer itself can create value, membership points will no longer need to be placed in a separate system, nor will they need to rely on unused points to sustain operations. Rewards will become part of the payment process, economic benefits will decrease, and customers will receive something they truly understand.

If more companies adopt this model, membership points will evolve into something more useful than the useless points we have accepted all along.

This is the transformation. Trapped points, liberated funds.