Exploring the Evolution of Consumer Engagement Through Tokenization
Within the rapidly evolving digital landscape, the idea of tokenization is one that has emerged as a groundbreaking development, allowing for the transformation of traditional assets into digital tokens.
In brief, the process entails converting rights to an asset into a digital token, with all of the associated data being stored on the blockchain. In fact, it is estimated that by 2030, the global tokenization market — valued at $2.39 billion in 2022 — will surge to a whopping $9.82 billion, demonstrating a compound annual growth rate (CAGR) of 19.6%.
The growing integration of tokenization and decentralized finance (DeFi) into the mainstream has had a particularly impactful impact on the banking and payments industry. By eliminating intermediaries, DeFi platforms can reduce transaction fees and enhance payment processing efficiency so much so that a whole host of financial giants such as HSBC, J.P. Morgan, and the Reserve Bank of Australia are already exploring their very own tokenization systems to facilitate payments, trading, and settlement processes.
Global tokenization market by specific regions (source: DataBridge Market Research)
Enhancing consumer engagement via tokenized loyalty programs
A sub-domain of the payments market where tokenization has garnered an immense amount of traction is that of loyalty programs. To elaborate, by using a decentralized ledger (DLT), it is possible to reshape the way in which businesses engage with their customers, allowing them to gain access to a more seamless, secure, and engaging experience.
To elaborate, tokenization facilitates the conversion of loyalty points into digital tokens, which can be easily traded, exchanged, or redeemed, offering a level of flexibility and interoperability that traditional loyalty programs have struggled to provide. This digital transformation not only caters to the increasing demand for personalized and meaningful connections with brands but also addresses many of the challenges faced by current loyalty schemes, such as account inactivity, inefficiency, and high customer acquisition and retention costs.
Moreover, as per a study conducted by Big Four consultancy giant KPMG, the integration of blockchain tech into existing loyalty programs could be the most effective way to introduce digital assets and cryptocurrencies into the consciousness of consumers en masse — with a significant majority of respondents indicating a clear willingness to use these tokens as part of an existing loyalty program.
Not only that, the approach can also lower the operational costs associated with running these programs (primarily via the elimination of back-office processes and lengthy reconciliations) as well as maximize brand loyalty across different industries. One company at the helm of this revolution is Tidepay.
The platform offers a unique set of services for businesses to launch their own branded, white-label rewards programs. Their innovative approach not only includes a variety of perks such as discounts and special event access but also expands the scope of customer engagement far beyond traditional marketing strategies into the realm of personalized and branded rewards applications suitable for a diverse range of sectors.
Most recently, Tidepay has taken its offerings a step further by partnering with luxury liquor brand ‘ATH Vodka.’ Together, the two companies have devised a blockchain-based rewards application, granting consumers the chance to experience exclusive events (like the Sony Music-supported Strawberries and Cream festival) as well as other unique experiences, including supercar adventures with Cannon Run, luxury weekend retreats, and even private yacht charters.
The future of digital interactions
With the tokenization industry set to evolve and grow in the near future, its natural progression is anticipated to foster a deeper integration with established financial frameworks, thus heralding the arrival of novel asset classes, including digital loyalty programs. To elaborate, by harnessing the power of the blockchain into their existing operational structures, brands with global consumer bases can establish personalized loyalty programs and unique experiences tailored to individual consumer behaviors and preferences. Looking ahead, it will be interesting to see how this realm continues to evolve and grow.
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