Loyalty Points Were Meant to Be a Currency. Consumers Are Starting to Realize They Aren’t.

For decades, loyalty points have functioned as a kind of shadow currency in the consumer economy.

Airlines issue miles. Credit cards distribute reward points. Hotels offer redeemable stays. Consumers accumulate these balances through everyday spending and increasingly treat them like a secondary savings account.

In theory, the system is straightforward: spend money today, earn points, redeem them later for something valuable. But there’s a structural problem with loyalty currencies that more consumers are starting to notice: the issuer controls both the supply and the value.

And the value can change at any time.

The Inflation of Loyalty Programs

Over the past year, airlines and credit card companies have continued making subtle adjustments to their rewards systems, adjustments that often reduce the purchasing power of points.

In 2025, Qantas increased the number of points required for several reward flights across its loyalty program, effectively reducing the value of accumulated points. For example, a Sydney-London reward seat rose from 55,200 to 63,500 points under the revised redemption structure.

Other programs have taken similar approaches. Some airlines have restricted how customers earn miles on cheaper fares, while others have shifted to dynamic pricing models that tie award redemption rates directly to fluctuating ticket prices. These changes rarely trigger widespread headlines, but their cumulative effect is clear: the purchasing power of loyalty points is steadily declining.

As loyalty programs grow more popular, rewards are often becoming less generous over time, reducing the real-world value of points for consumers. In many ways, loyalty points now experience something similar to inflation, a gradual erosion of purchasing power that happens in the background.

Loyalty Programs Became Financial Businesses

To understand why this happens, you have to look at what loyalty programs have become. When frequent flyer programs launched in the early 1980s, they were designed primarily as marketing tools. Airlines rewarded repeat travel with miles that could eventually be redeemed for free flights. But over time, those programs evolved into massive financial ecosystems. Airlines now sell billions of dollars’ worth of points to banks that issue co-branded credit cards. Those banks distribute the points to consumers as incentives for spending.

The scale of the system is enormous. Loyalty partnerships between airlines and credit card companies generate tens of billions of dollars annually and are among the most profitable segments of the travel industry. When loyalty programs become financial products, they inherit the same economic pressures as any other monetary system. Too many points circulating? Increase redemption thresholds. Too much liability sitting on balance sheets? Adjust reward pricing.

The issuer has a simple lever to manage the system: change what the currency can buy.

Closed-Loop Currencies and the Trust Problem

Loyalty points operate in what economists would call a closed-loop monetary system.

The company that issues the currency also determines:

• how many points exist
• how those points can be used
• when the redemption rules change

Consumers participate in the system but have no control over its monetary policy. Imagine if your bank could suddenly decide that the dollars in your savings account would buy 20% less next year. That scenario would provoke immediate backlash.

Yet something similar happens inside loyalty ecosystems all the time, usually through incremental changes buried in updated program terms or algorithmic pricing adjustments. As long as consumers perceive the rewards as valuable, the system works. When that perception begins to erode, loyalty becomes much harder to maintain.

Consumers Are Becoming More Financially Literate

One of the biggest shifts happening today is that consumers are becoming far more aware of how value works. Budgeting apps, investing platforms and fintech tools have made people comfortable thinking about inflation, purchasing power and long-term value.

At the same time, loyalty balances have grown larger than ever. Millions of consumers now accumulate hundreds of thousands of points through credit card spending, travel and everyday purchases.

Once people begin thinking about those balances as financial assets, they naturally start asking different questions:

• Is the value stable?
• Is the system transparent?
• Can I trust that these points will still be worth something meaningful in a few years?

Those questions expose a weakness in traditional loyalty programs: most weren’t designed to behave like reliable stores of value.

They were designed as marketing incentives.

Loyalty Still Works, But the Model Is Changing

None of this means loyalty programs are disappearing. In fact, the loyalty industry continues to grow rapidly. The U.S. loyalty market alone is projected to reach nearly $26 billion as brands expand rewards programs to influence customer behavior and engagement. But expectations around rewards are evolving.

Consumers increasingly want systems that feel transparent, predictable and fair. They want to know the value they earn today won’t change tomorrow. For brands, that creates a strategic question: what does loyalty look like in an era where consumers evaluate rewards more like financial assets than promotional perks?

Programs that rely on opaque pricing and unpredictable redemption values may struggle to maintain trust. Programs that prioritize transparency and clear value may find themselves with a meaningful advantage.

The Future of Loyalty Depends on Trust

Ultimately, loyalty currencies will succeed or fail based on consumer trust. Consumers participate because they believe the value they’re accumulating today will translate into something meaningful tomorrow.

When redemption rules constantly shift, that trust starts to fade. And when people begin questioning the value of a currency, whether it’s airline miles, credit card points or anything else, rebuilding that trust becomes the most important challenge of all.

About

Will Reeves is the co-founder and CEO of Fold, a consumer financial platform focused on making bitcoin more accessible through everyday rewards. Prior to founding Fold in 2019, Reeves held product leadership roles at Thesis, A3 Ventures and BYND, where he worked on digital transformation and innovation initiatives for Google and other Fortune 500 technology companies. He previously served as Head of Payments at Thesis, leading the development of bitcoin-native payment technologies. Reeves holds a B.A. in Rhetoric and Political Science from the University of California, Berkeley.

Editor’s Note