Loyalty Points and Social Tokens

The last edition of Pacenotes discussed some points from Lana Swartz’s book New Money. This week I’d like to highlight a few examples from her chapter on loyalty points.

Loyalty points are probably the closest analogue social tokens have to existing systems for groups of users or customers. The examples that spring to mind might be airline miles, or Starbucks’s points system.

Indeed, Swartz starts her chapter on loyalty points with a thumbnail portrait of the Starbucks Card system, which had $1.2 billion worth of credit loaded into it by customers in 2016, making it the biggest prepaid debit company in the US at the time. She quotes the economist Michael A. Turner:

Starbucks customers who lock up their funds inside the Starbucks Card system get all sorts of incentives: free drinks, discounts and access to special products. That sounds more than little like the weird and wonderful world of defi, doesn’t it? In defi, users get rewarded for depositing their funds into decentralised protocols — but the rewards might come with a little less caffeine and sugar.

Loyalty programmes lay bare one of the tenets of the idea behind money: that money is what people say is valuable. But it also goes a little deeper than that. Swartz quotes Hyman Minsky here: “Everyone can create money. The problem is to get it accepted”. Swartz talks about a future in which money plurality may be commonplace, and focuses on the “corporate currencies” from brands like Starbucks.

If these are corporate currencies, then what sorts of communities do they serve? Swartz’s idea is that of the “transactional community” or “networks of shared trust in the communities themselves — their institutions, members and structures of feeling.”

Why are corporate currencies proliferating now? Mainly it’s because the dominant form of money—state-sponsored fiat money—is undergoing a bit of a crisis. The institutions that back fiat money are facing an erosion in public trust and regard. “For corporations offering branded, for-profit, trust as a service, it is an opportunity,” Swartz writes.

With that, I’m going to pull out a few highlights that discuss loyalty schemes in various contexts:

Just to synthesise some of the points from above. In designing transactional communities of social tokens users, it’s important to keep in mind that token schemes are powerful not just because of financial incentives, but also because of social incentives. The token scheme can generate status: think of Discord roles, special reaction emoji, access to certain parts of the server and so on.

But token schemes can also be gamed. That’s part of the point. If your transaction community is actively gathering to figure out how to crack your code, you’re doing it right. In this sense, it might be counter-intuitive to think that making a scheme more complex rather than simpler, creates a kind of game for community members to take part in. Points are play.

As for what communities to design for, think of trucker loyalty schemes the next time ‘loyalty points’ conjures up images of plush and anodyen airport lounges. Transactional communities cut across geography, class and profession. There are some super interesting niches out there that can be bound up with their own social monies.

The macro trends are pointing in the direction of more types of payments and monies, not fewer. That’s what the “Gutenberg parenthesis” idea tells us. Keeping a proliferation mindset means potentially generating social tokens at more and more granular micro levels.

And that’s it for this edition of Pacenotes!

Related posts:

Instead of writing yet another long think piece on chatbot design, I thought I’d illustrate my point with a comic.