With the recent announcement that Starbucks is going to launch a series of branded NFT collections, the ownership of which allows for “access to exclusive experiences and perks,” the topic of customer loyalty and the blockchain is front and center. Starbucks Rewards is one of the largest loyalty programs in the world, with over 26 million members, and their launch of a Web3 loyalty program poses several questions:
- With NFT sales down 92% (see The Wall Street Journal “NFT Sales are Flatlining”), why did Starbucks choose NFT’s as the vehicle to power their Web3 initiative?
- How will they simplify the experience of using crypto wallets for their 26+ million rewards members, and how will they secure their accounts against unending phishing attacks?
- How will they secure their own process against smart contract flaws or worse?
As companies and organizations seek to leverage Web3 for customer loyalty, they’re faced with several early decisions, including whether they anchor their program using NFTs or Verifiable Credentials (VCs). Verifiable Credentials share some similarities with non-fungible tokens, including their use of a distributed ledger (e.g., blockchain), tokenization, and cryptography. But there are important differences that make them uniquely well-suited for scaling a customer loyalty program:
Verifiable Credentials are Non-Transferrable
While NFTs can be transferred or sold to anyone, credentials issued to a Web3 wallet are non-transferrable, which makes them uniquely suited for customer loyalty. If a company or organization issues you a credential for being a loyal customer, member, or frequent purchaser, that credential is unique to you and can’t be transferred, traded, or sold to another user. Your status can’t be sold or traded to someone else.
Verifiable Credentials are Revocable
Unlike NFT’s, credentials can be revoked at any time by the issuer, and they can be programmed to expire to map to a membership duration or rewards period. This offers companies and organizations flexibility in how they reward their stakeholders. For example, a credential can be issued for an event, or to access an offer that expires, and after that, the credential can be removed from the customer’s wallet.
Verifiable Credentials Offer an Easy Customer Journey
NFT’s are held in crypto wallets, which can be cumbersome to use and must meet Anti-Money Laundering (AML) and KYC regulations during the onboarding phase (only about 16% of Americans have a crypto wallet). Verifiable Credentials are held in Web3 wallets, which have no AML or KYC regulatory requirement, and they’re often cloud-based, which means anyone with a web browser can hold credentials with no app download required. They are similarly protected by encryption and are secure, they’re just easier to use for consumers and don’t require the collection and verification of identity data during the onboarding process.
Verifiable Credentials are Interoperable
Most NFTs are tied to the Ethereum blockchain, though other blockchains have implemented their own form of NFTs. Credentials can be anchored to any blockchain through decentralized identifiers, or DIDs. This makes them uniquely interoperable — they can be verified by anyone, anywhere, anytime, including through the use of a QR code at offline venues. This lowers friction and improves the scalability of a customer loyalty program.
Verifiable Credentials are Divisible and Privacy Protective
A unique property of Verifiable Credentials is that they can be verified in a way that allows attributes from multiple credentials to be combined and presented at the same time. Let’s say, for example, that a particular member benefit requires the stakeholder to be 21 years of age. That information can be cryptographically verified without disclosing the consumer’s date of birth or actual age. It’s called a Zero Knowledge Proof — its privacy-protective to the consumer and incredibly powerful to the issuer because it allows them to verify data from multiple credentials in a holder’s wallet (all with their permission, of course!).
Verifiable Credentials vs. NFT’s for Customer Loyalty
In sum, Verifiable Credentials have superpowers that make them well-suited for customer loyalty and rewards programs. They are free to issue, can’t be transferred, and can be revoked or expired. The onboarding process is easier for consumers, causing less friction and more adoption, and they can be verified by anyone, anywhere, anytime. They are infinitely scalable and low-cost.
To learn more about how Verifiable Credentials can power your customer loyalty or membership program, contact us at Dentity.