The Sweetbridge rewards program works with any business that sells or buys anything. Let’s look at the example of an airline.Today, airlines use reward programs to incentivize customers to fly with them rather than their competitors. Customers are awarded points when they fly with the airline or when they use one of the airline’s partner credit cards. Those points can be redeemed for discounted flights, or even free flights, on select routes or times. Generally, airlines only allow rewards points to be used on flights that have historically been underbooked. In this way, they can encourage rewards members to utilize an underutilized asset by occupying seats that would historically be empty.This model produces some loyalty and goodwill among customers, but it is ultimately a short-lived loyalty. Today, customers spend their points to buy cheaper flights. Once their points are spent the only reward the customer has to stay loyal is tied to the status they have earned within the rewards program. Customers will often ditch loyalty for a better, cheaper flight.The Sweetbridge reward program is different. Rather than spending points that disappear once spent. The customer is rewarded with an asset, Sweetcoin (SWC), that they hold rather than sell. This asset gives them recurring cashback not only on flights but also on other purchases from in-network sellers. The customer is incentivized towards continuous enduring loyalty rather than a short-lived loyalty that lasts only as long as their points.With Sweetbridge, the customer can get recurring cashback and airlines can get enduring customer loyalty. Loyalty that isn’t spent but instead increases as the network grows and their potential for cashback rewards through the network increases. Whenever the network grows the cashback value of SWC increases meaning that the amount a buyer can receive for the same number of allocated SWC increases.But, the real benefit for airlines is that they can get enduring loyalty without liability.Today, rewards programs like show up on the airline’s books as a liability. In 2017 one prominent airline we researched had 1.8B Euros worth of liability from their rewards program. They justify that cost with the argument that the rewards program increases loyalty and allows them to utilize underutilized assets by filling empty seats.Sweetbridge rewards works differently than traditional rewards programs. There is only a liability created on the books at the point of purchase of a flight and it is cleared from the books at the end of the month. Wondering how?When a SWC holding customer buys a ticket from a Sweetbridge network airline they would pay the full price of the flight, but the airline would put a percentage of that revenue, let’s say 3% (which is consistent with what their current rewards program costs them), into the Sweetbridge rewards pools. 1.5% would go into the Network cashback pool and 1.5% would go into the Seller-Specific Reward Pool.At the end of the month whatever is in the Network cashback pool would be divided up between all holders of SWC who have allocated SWC towards cashback for that month and who bought purchases in network, like an airline ticket from a Sweetbridge network member. The customer who bought an airline ticket that month would be rewarded in cashback, that cashback could be as low as the 1.5% of the ticket that the airline contributed or it could be higher if there is more money in the Network Cashback Pool from in-network purchases than there is SWC allocated for cashback. The more in-network purchases the more reward potential for that customer who bought the ticket. This incentivizes that customer to encourage their friends and family and others to join the program, to buy their airline tickets through airlines that are part of the Sweetbridge network, and to make other in-network purchases. The more the network grows the more cashback benefit possible.When the buyer makes the purchase with the airline and the airline sends 3% to the reward pools that 3% shows up on the airline’s books as an expense. At the end of the month when the reward pools are distributed this expense has been paid and distributed. It is then cleared from the books.The airline never has to carry the liability for more than a month. And only has to carry it when customers actually purchase with them, they don’t need to “hold” liability or seats for the uncertain prospect of being redeemed by rewards members.What does this look like for the overall financials of an airline like the ones we’ve researched?One large airline company we looked at currently reports about 21.5B in sales revenue for their network airlines. This is not counting cargo shipping or other things like that. They currently spend roughly 3% of that on their rewards program. Keeping that 3% the same, they would send 630 million to the rewards pools, 315 million to the Network Cashback Pool and 315 million to the Seller-specific Reward Pool.At the end of the month, the 315 million in the Network Cashback Pool, plus whatever is contributed to the Network Cashback Pool from other in-network Sellers, would be distributed among those who have both bought purchases in-network that month AND allocated SWC towards cashback. The amount each gets would be depended on the amount of SWC they have allocated for cashback, the amount they spent in-network and the calculation of the SWC cashback value for that month. The cashback value of SWC is calculated by dividing the amount of money in the Network Cashback Pool at the end of the month by the total number of SWC that have been allocated towards cashback for that month. Therefore if there was $10M in the Network Cashback Pool and 10M SWC had been allocated for cashback, then the SWC cashback value would be $1 per SWC ($10M/10M = 0.10).By way of example, let’s say you bought a $2,000 dollar flight from a Sweetbridge network airline and you had 1,000SWC allocated towards cashback, with a cashback value per SWC of $1 for that month. That means you would get $1,000 in cashback, effectively making your flight cost $1,000 rather than $2,000. What if you had 3,000SWC allocated towards cashback when you bought your $2,000 flight and the cashback value per SWC was $1? In this case, you would only get back $2,000 because the protocol ensures that no one gets more cashback then they themselves spent in-network. This prevents people from gaming the system and ensures that only those who use the network benefit from the network.With the Sweetbridge rewards program, there is a lot of potential for the customer to benefit far more than they do with current airline rewards programs.But what about the airline? So far we’ve shown that the airline can eliminate liabilities from their books without spending any more on the Sweetbridge rewards program then they are already spending on their current reward program. Let’s look now at how they could actually spend less and improve their bottom line.Let’s talk about the Seller-Specific Reward Pool. At the end of the month, the airline can choose where the money in their Seller-specific Reward Pool gets directed. They could choose to send it to loyal customers as additional cashback reward, they could choose to send it to a charity, or they could choose to do something a bit unique with it that will enable them to lower the cost of their rewards program while encouraging underutilized assets to be used for both their benefit and the benefit of their customers.The airline could use the money in the Seller-specific Rewards Pool to buy down part of the cost of historically underutilized flights, in essence subsidizing those flights. They could offer these lower cost flights only to holders of SWC, or only to select tiers of frequent fliers who hold SWC. This would enable them to offer lower cost flights without losing their reputation for being an upper-class airline. Offering these flights only to frequent fliers would keep them from looking like a discount airline overall, but would incentivize those frequent fliers to still chose to fly on historically undersold flights. When one of these frequent flier customers, who also hold SWC, bought a lower cost subsidized ticket they would pay full price, but the airline would still contribute 3% to the reward pools, essentially subsidizing the very pool that they are using to subsidize the tickets, to begin with. This creates a positive feedback loop — the airline subsidizes tickets for members, the members buy the low-cost tickets, and part of the low-cost ticket revenue goes back into subsidizing future low-cost tickets for members.In this way, the airline could incentivize SWC members to buy tickets on underutilized flights, without utilizing the current system of blackout days. This is better for the airline’s customers because they can now use their loyalty (by way of a cashback reward) on any flight rather than just select flights. It’s also better for the airline as it’s less to manage, eliminates liability, and still incentivizes customers to fly on flights that are historically underutilized.Sweetbridge Rewards Use Case: The problem of Liability in current rewards programs was originally published in Sweetbridge on Medium, where people are continuing the conversation by highlighting and responding to this story.