Stablecoins are eroding membership points programs

Foreword

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

"Sir, would you like to redeem your reward points?"

I said yes, hoping to get some discount.

She typed for a few seconds, looked up, and said, "Your points balance is $0.70."

I've been using that membership card for almost a year.

It was less disappointing and more laughable. I spent a whole year buying groceries, and all I got in return was… a piece of chewing gum. And not even a large pack.

That moment reminded me of all the loyalty programs I'd ever joined: airline miles that were always just a little short to redeem for the flight I actually wanted; restaurant stamps I always forgot to bring; credit card points that proudly told me I'd "unlocked" a $20 voucher after spending nearly $1200. These programs mostly felt like they were designed for another era, for customers with endless patience who couldn't use a calculator. Strangely, loyalty programs are everywhere: coffee shops, airlines, banks, pharmacies, food delivery apps, and so on. Yet, they're incompatible. Each brand wants loyalty, but only within its own ecosystem. Therefore, your value is trapped there. Points can't be transferred, rewards can't be expanded, and the points you earn usually don't buy anything of real value. Meanwhile, the way we pay and transfer money is quietly undergoing a radical transformation. Whether it's instant domestic payments or cross-border transfers, everything has become faster, more open, and more global. However, amidst all these changes, stablecoins have emerged: they are digital versions of the US dollar, possessing currency-like functions, but without the need for waiting, and are not restricted by national borders or bank hours. A new idea has quietly begun to seep into discussions about loyalty: what if loyalty didn't need points at all? Instead of giving you points of dubious value, why don't brands reward you with a truly spendable digital currency? This digital currency won't disappear after 90 days, doesn't require 40 redemption conditions, and doesn't force you to buy anything from the store that originally issued it. This article will delve into how stablecoins could completely replace points systems. Let's begin! Points are not rewards, they are liabilities. The interesting thing about loyalty programs is that they seem incredibly attractive on the surface. You can earn points, enjoy certain benefits, and occasionally redeem items. However, the structure of these programs doesn't truly keep up with people's consumption habits and today's business models. First, points aren't rewards, but liabilities. Every point a company issues is recorded as an amount owed to you later, meaning membership point programs are not just a marketing tactic, but an accounting commitment. For example, airlines manage billions of unused miles, which naturally incentivizes them to strictly control their point systems rather than being overly generous. The second problem 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 don't share technology, their value settlement methods differ, and they are not connected to each other. Therefore, the rewards you earn ultimately remain on the platform where they originally belonged. Ironically, the entire system is maintained by points attrition. The attrition rate refers to the percentage of points that people never redeem. Across industries, the majority of points are never used. In many sectors, 30% to 40% of reward points end up unused until they expire. Companies consider this when developing programs because the economics would be drastically different if everyone redeemed all their earned points. But unused reward points sitting idle don't create any value; they don't circulate, generate revenue, or strengthen customer relationships. They are merely an obligation. Therefore, loyalty programs become mechanisms that brands maintain out of habit and expectation, rather than mechanisms that are truly beneficial to both parties. What is the source of funding for rewards today? If you examine how rewards are calculated today, you'll understand why loyalty programs operate this way. Most loyalty programs—whether they're banks, airlines, retail chains, or food delivery apps—are built on the same simple question: "Where do we get the money to reward users?" For banks and card issuers, rewards come from transaction fees, the fees merchants pay each time a card is swiped. After each party in the payment chain takes its share, the remainder goes to the bank, which uses it for cashback and points. If the net profit margin is 1.5% to 2%, the bank might decide to return 0.5% to 1% to users, with the remainder going towards fraud risk, benefits, and operating costs. This is why credit card rewards look roughly the same around the world. Airlines employ different business models, but face similar limitations. Their frequent flyer programs don't rely on every flight you take to sustain operations; instead, they generate revenue by selling miles to credit card companies. These miles eventually end up in your account, but initially, they are simply an expense within the partnership agreement. Because 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. Retailers and chain grocery stores typically rely on thin profit margins for rewards. If a grocery store earns only a few cents for every dollar it sells, it cannot afford to offer too many rewards, otherwise, it would offset its own profits. Coffee shops and restaurants face the same problem. While getting a free drink after ten purchases is certainly appealing, it's actually only because the profits from the other nine purchases are enough to cover costs. The situation is more complex for apps and e-commerce platforms. Their profit margins are extremely low, so they typically share reward costs with merchant partners. For example, if a food delivery app offers a $3 discount, the restaurant has to bear a portion of the cost because the app's own profits aren't enough to cover the entire discount. Ultimately, reward mechanisms only work effectively if all parties agree to share the costs. If any party withdraws, the entire rewards program fails. The theme is largely the same across all these industries: rewards come from someone's profits. These are provided by the meager economic profits remaining after companies have paid for operations, partners, and the underlying payment infrastructure. This is why loyalty programs, though ubiquitous, are often monotonous: points accumulate slowly, redemption options are limited, and terms are complex. Every penny you earn is what's left after deducting a series of costs. Moreover, loyalty is limited because every dollar of reward depends on others relinquishing a portion of their profits. What would a new rewards system based on stablecoins look like? The limitations of current loyalty programs are simple: the funds to keep these programs running must come from the profits of certain companies. This is why every industry—banks, airlines, retailers, apps—faces the same bottleneck. The generosity of a system depends on the economics behind it. But in recent years, the situation has quietly reversed. The operating costs of payment channels have decreased, settlement speeds have increased, and they can directly carry value without lengthy intermediaries. As payment channels become more convenient, the systems built on top of them naturally change. This is where stablecoins come in. They're not a new membership rewards mechanism, but rather a completely new foundation for the flow of funds. Stablecoins aren't issued as rewards; they're essentially digital forms of the US dollar, which fundamentally alters how their economy operates. Most large stablecoins hold reserves in short-term US Treasury bonds, currently yielding around 4% to 5% annually. This is real and predictable return generated by the underlying assets, not from promotional or marketing budgets. When holding billions of dollars worth of such assets, even a 1% yield translates into substantial income. A small fraction of this income can be returned to users, meaning rewards don't have to be entirely drawn from merchants' already thin profit margins. Currently, value goes through multiple layers—merchant fees, card organizations, payment processors—before the final consumer receives the remainder. In the new model, rewards begin early in the process. Reserves behind the stablecoin generate yield, a portion of which is used for incentives. Because payments and rewards operate on the same track, the entire process becomes much simpler. There's no need to worry about accumulating backend liabilities, users forgetting to redeem points, or complex partner networks ensuring value availability. The track itself creates space for rewards. Furthermore, because payment channels are open, value doesn't have to be confined to a single application. If a user earns a few dollars in stablecoins, that value can be immediately transferred to their wallet, used for other spending, or deposited into a savings account, without the need for a custom integration or closed ecosystem. The rewards are used like anything the user is already familiar with, without requiring a separate interface for redemption. In short, this model doesn't replace loyalty programs, but rather the need to operate a loyalty program as a large, separate system. The rewards mechanism is integrated into the payment process, no longer an additional procedure requiring separate ledger management. This reduces the burden on businesses, improves the user experience, and eliminates reliance on idle balances to maintain operations. My Thoughts: This shift feels real because it's no longer just an idea. Many companies have already begun moving in this direction. Klarna, one of Europe's largest consumer payments institutions with over $80 billion in annual transactions, recently launched its own stablecoin. Soon, its loyalty program's funding will no longer be limited to credit card network fees and merchant discounts, both of which are very expensive. Klarna's stablecoin could revolutionize this model. Klarna allows for low-cost settlements without relying on traditional payment systems, holding user balances in assets with an annualized return of 4-5%. This return can subsidize rewards, reduce project costs, and decrease reliance on transaction fees. It's too early to draw conclusions, but this move points to a future direction. Once the payment layer itself can create value, membership points won't need to be held in a separate system, nor will they need to rely on unused points to sustain operations. Rewards will become part of the payment process, reducing economic efficiency, and customers will receive something they truly understand. If more companies adopt this model, membership points will evolve into something far more valuable than the useless points we've always accepted. This is the transformation. Trapped points, freed funds.