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When airlines integrate technology, it’s generally a good thing for consumers. Be it complimentary in-flight entertainment or faster and more reliable Wi-Fi in the air, technology has made (and will continue to make) a positive impact on the travel experience. Now one airline is applying this technology to its redemption scheme, and while details are scant, it has the potential to create added flexibility for customers looking to use their hard-earned miles.
Singapore Airlines recently announced that it will soon roll out the world’s first blockchain-based airline loyalty digital wallet (say that five times fast). This technology is probably best known (and actually started) as the underpinning of Bitcoin, the world’s most valuable digital currency. As described in a 2017 Harvard Business Review article, “Blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.” Through a decentralized database, participants in the blockchain can communicate directly with each other to verify the requested transaction, rather than needing to go through a central node or intermediary.
While this may sound like technological gobbledygook, it essentially turns KrisFlyer miles into a bona fide digital currency by enabling members to redeem their miles at select retailers for point-of-sale transactions. When you’re checking out at a participating merchant, rather than swiping a credit card or paying with cash, you’d now be able to redeem KrisFlyer miles to cover those purchases. The blockchain technology serves as a secure method for verifying these transactions instantly.
Here’s what Singapore Airlines CEO Goh Choon Phong had to say about the new program:
“Innovation has been a key contributor to the success of Singapore Airlines since Day 1 and we are very excited about this world-first initiative, which will bring even more benefits to members of our KrisFlyer programme.”
Not surprisingly, this will roll out initially in the Singapore market and is expected to launch in approximately six months. However, as with any new announcement of this kind, the devil is in the details, and I have several questions to which we don’t yet have answers (note that we’ve reached out to Singapore Airlines directly with these questions but haven’t heard anything back yet):
- What value will this redemption option give you? Savvy TPG readers know the incredible value you can from redeeming your miles on Singapore’s fantastic premium-class cabins, a large part of why KrisFlyer miles are pegged at 1.4 cents apiece in TPG’s most recent valuations. If I were a betting man, I’d venture a guess that these redemptions would be at best 1 cent per mile, though I also wouldn’t be surprised to see them even lower than that. Speaking of which…
- Will there be consistent value across all participating partners? Singapore’s press release indicates that the airline will own the private blockchain technology used for the program and only involve select merchants. But will all of these be treated equally? Will there be limited-time bonuses at preferred partners? Having anything other than a consistent redemption rate would make this process more convoluted and could potentially derail any true scale in implementation.
- How will these transactions be processed? Technological advances have provided numerous benefits but also increase the likelihood of bad actors exploiting weaknesses in the system. In order for this to work, securing the transactions is essential. Would you use your smartphone to complete the purchase, much like the mobile payments that are currently included in the Q1 bonus category on the Chase Freedom here in the US? All KrisFlyer members would want to make sure that their accounts are being protected to avoid a nasty surprise when they go to book that dream trip and find their account drained!
My final question is one that really no one can answer right now: Will this approach catch on? As of now, Singapore is the only carrier moving in this direction, but airlines are notorious copycats. If this rollout is successful, it’s highly probable that other carriers will follow suit and introduce similar programs of their own.
Additional flexibility when it comes to redeeming your points or miles is, in my opinion, always a good thing, the main caveat being that it doesn’t in any way devalue or replace other, more lucrative redemption options. Singapore Airlines deserves credit for investing in a new and creative way for its members to redeem their KrisFlyer miles. That being said, the nitty-gritty details of this program have yet to be released, so it’s way too early to call it a winning formula (or even a worthwhile option). Only time will tell if this is truly an enhancement to the program or simply a way for the carrier to remove the liability of outstanding miles by duping unsuspecting travelers into redeeming their miles at a sub-optimal rate.
Flight Review: Singapore A380 Suite with Brian Kelly
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