The original question sounds simple: if the customer never prepays and only earns points as they spend, is a loyalty point still a financial instrument?

The short answer: yes. Loyalty points are a financial instrument particularly well suited to service companies: restaurants, cafe chains, airlines, hotels, ride-hailing, e-commerce, super apps. It is not just "marketing." It is how a business issues a unit of internal value, locks that value inside its ecosystem, and then uses it to steer future consumption behavior.

1 · Accounting Does Not Treat This As A Gift

IFRS 15 requires a business to identify the performance obligations in a contract with a customer, allocate the transaction price across each obligation, and recognize revenue only when that obligation is satisfied. The IFRS Foundation describes this five-step model clearly: identify the contract, identify the performance obligations, determine the transaction price, allocate the price, and recognize revenue when the customer obtains control of the goods or services.

Applied to loyalty points: when a customer buys a 100,000 VND meal and earns 10,000 VND worth of points for next time, the restaurant does not simply have one completed transaction. The meal has been delivered, but the reward point is a separate promise: next time, the customer has the right to claim goods or a discount using that point balance.

Put more bluntly: the restaurant now owes you 10,000 VND worth of goods in the future. Instead of cutting the bill by 10% on the spot so you walk away with real cash-equivalent value, they issue points to keep that value inside their own system. You only get that 10,000 VND back if you return, meet the conditions, redeem before expiry, and stay within the range of products they allow for redemption.

An IFRS Community example illustrates this mechanism precisely: a company sells 100 million USD of goods, issues 5 million points, expects 90% of points to be redeemed; the value attributable to the points is allocated separately and recorded as a contract liability, then released into revenue only once the customer redeems the points or they expire.

Stated crudely: a reward point is a deferred discount. If a restaurant wanted to give the customer the benefit immediately, it could simply cut 10% off the bill. But by converting it into points instead, it keeps that benefit inside its own system, forcing the customer to come back to claim the value.

2 · Why Service Companies Love This Tool

Loyalty points are strongest in service industries because the marginal cost of a reward is usually lower than the customer's perceived value of it. A free drink might be valued by the customer at 50,000 VND, but the chain's actual cost could be far lower. An empty airline seat, an off-peak hotel room, a free-shipping code, an off-peak ride voucher all follow the same logic: the business uses spare capacity or soft margin to buy repeat behavior.

But the deeper layer isn't the reward itself. It's the right to orchestrate the ecosystem. When a company issues points, it creates a layer of internal currency sitting between the customer and the product. That layer lets it do things a straight discount never could.

This is real leverage. A service company doesn't just sell today's item; it uses today's item to issue a claim on a future purchase. That claim in turn pulls the customer back into the app, generates data, raises frequency, opens cross-sell opportunities, and makes each piece of the ecosystem look cheaper when viewed in isolation.

This is why Grab, Shopee, Starbucks, airlines, hotel chains, and F&B chains all love loyalty. Points don't need to be legal tender to have power. As long as enough people accept them within a closed loop, they become a secondary payment layer that lets the issuer control behavior better than cash ever could.

The more compact conclusion: a loyalty point is simultaneously a zero-interest liability and a tool for building moat and ecosystem. It's a liability because the business has issued a claim on future value to the customer without yet delivering the corresponding goods or service. It carries no interest because the customer is never compensated for the waiting time. And it builds moat because that value never leaves the ecosystem: the more points sitting inside the app, the more reason the customer has to come back; the more partners that accept the points, the harder the ecosystem is to leave.

3 · Three Privileges Of The Issuer

Lock-in: swapping cash for money that only works in one place

Cash-back is a real benefit because the customer retains the right to leave the system. A loyalty point is different. It turns today's discount into tomorrow's spending right, but only with the issuing business itself or the partners it chooses.

This is why large loyalty programs take on the shape of a private currency. A study in Manufacturing & Service Operations Management calls loyalty points a form of currency that exists in parallel with conventional money, then analyzes how consumers decide whether to pay with points or with cash.

Breakage: a legal right to walk away from a debt

Breakage is the portion of issued points that never get redeemed. Gift cards, non-refundable tickets, air miles, coffee stars - the mechanism is the same: the business owes the customer an obligation, but some share of customers will forget, give up, or never accumulate enough points to redeem.

This is not a footnote. A 2025 study in the International Journal of Research in Marketing calls breakage a critical indicator for managing loyalty program profitability, especially in high-value, low-frequency programs such as airlines. The paper also stresses that outstanding points become genuine financial liabilities of the business.

Real-world numbers show this is not small change: in its 2024 Form 10-K, Delta recorded year-end loyalty program deferred revenue of 8,826 million USD. That is a loyalty-program liability large enough to warrant its own line in the financial notes, not a few throwaway marketing sentences.

From the customer's perspective, this is the issuer's strangest privilege: it can set an expiry date that makes the obligation vanish. If the customer forgets to redeem, doesn't have enough points, redeems too late, or loses eligibility under the terms of use, the business no longer needs to deliver the corresponding goods. That portion of the obligation is released into revenue. The polite term is breakage. The blunt term is the right to erase a debt by design of the fine print.

Devaluation: inflation controlled by the issuer

In a normal monetary system, a central bank is constrained by inflation, market confidence, politics, and exchange rates. In the loyalty economy, the issuer is essentially the central bank, the finance ministry, the courts, and the exchange all at once.

Today, 100 points buys a drink. Next year, it takes 150. Economically, that gap is a reduction in the business's obligation to the customer. The US CFPB warned back in 2024 that credit card rewards programs may violate rules against unfair, deceptive, or abusive practices if the redemption value of earned or purchased rewards is devalued, or if the right to claim rewards is blocked by vague conditions.

4 · Case Study: Starbucks And McDonald's

These two cases show that a loyalty point is not a marketing accessory. At sufficient scale, it becomes a layer of financial and data infrastructure sitting between the customer and the product.

Starbucks: Stars, prepaid balance, and breakage revenue

Starbucks is close to a textbook case of the "internal currency" model. A customer loads money onto a stored value card or the app, buys coffee, earns Stars, and then uses Stars to redeem free products. In its fiscal 2025 Form 10-K, Starbucks states plainly: money loaded onto stored value cards is initially recorded as deferred revenue and revenue is only recognized once the customer redeems. The company also records unredeemed Stars in the loyalty program as part of deferred revenue.

The numbers are large: at the end of fiscal 2025, the balance related to Starbucks stored value cards and the loyalty program was 1,751.7 million USD. During 2025, Starbucks deferred an additional 15,245.8 million USD from card activations, reloads, and Stars earned, while recognizing 15,199.5 million USD from card/Stars redemptions and breakage.

Breakage is real money too. Starbucks recorded breakage revenue in 2025 of 200.4 million USD within company-operated store revenues and 22.0 million USD within licensed store revenues. Combined, that's more than 222 million USD of revenue from the portion of value customers never redeemed, according to the company's own disclosures.

McDonald's: loyalty as a demand operating system

McDonald's doesn't project the "coffee bank" image as clearly as Starbucks, since its core model isn't built around stored value cards. But MyMcDonald's Rewards shows the ecosystem side of loyalty even more clearly: it's a tool for pulling customers into digital channels, identifying buyers, personalizing offers, raising frequency, and coordinating traffic across mobile, kiosk, drive-thru, counter, and delivery.

According to McDonald's full-year 2025 results, the loyalty program had reached 70 markets, generating nearly 37 billion USD in systemwide sales from loyalty members during the year, up 20% year over year. The number of loyalty users active within 90 days rose 19% to nearly 210 million by the end of 2025. With full-year 2025 systemwide sales of more than 139 billion USD, loyalty members accounted for roughly a quarter of total systemwide sales.

McDonald's strategic targets make the intent even clearer: in its 2024 10-K, the company set a plan to grow 90-day active loyalty users to 250 million and raise annual systemwide sales to loyalty members to 45 billion USD by the end of 2027. This isn't "handing out points for fun." It's a demand-distribution strategy.

Two different models, but the same underlying nature. Starbucks monetizes loyalty through prepaid balance, Stars liability, and breakage. McDonald's monetizes loyalty through scale, data, and frequency. One looks more like an internal wallet; the other looks more like an operating system for demand. Both show that a loyalty point is a financial instrument for a service company, not merely a promotional program.

5 · When Point-Farmers Show Up, The Model Flips

A loyalty program is designed around an implicit assumption: most customers behave like ordinary people. They forget points, dislike downloading an app, don't optimize every promotion, and don't calculate the IRR of a free bubble tea. That very lack of optimization is what makes the model profitable.

When a third-party group appears that specializes in pooling receipts, borrowing accounts, scanning apps on someone else's behalf, or reselling benefits, they change the nature of the program. They are no longer loyal customers. They are traders operating in a secondary market the program was never designed to have.

Anti-loyalty-fraud literature calls this pattern account takeover, fake account creation, promo abuse, points laundering, or rule arbitrage. Brandmovers describes clearly a category of abuse that requires no system hacking at all: users exploiting logic flaws, return-and-repurchase cycles, duplicate receipts, referral structures, or rules that can be triggered repeatedly. Open Loyalty likewise stresses that loyalty points have become a shadow currency that can be traded or resold with far less oversight than cash.

An important caveat: not every attempt to optimize points is fraud. A customer exercising their legitimate rights is normal. The problem begins when organized, professional operations turn a loyalty program into a discount-printing machine for people it was never designed for, or pool value from many casual customers to drain the breakage the merchant had budgeted for.

6 · Is This Actually Win-Win For The Customer?

The fair answer: it can be win-win, but only within a narrow window. Customers win when they were already going to buy the product, clearly understand the value of the points, redeem quickly, and don't let loyalty push them into buying more than they need. Businesses win when points genuinely generate incremental repeat purchases, rather than just subsidizing behavior that was going to happen anyway.

But loyalty programs are usually sold using the language of "appreciation," while the actual economic mechanism is one of asymmetry. One side holds the dashboard, the cohort data, the right to change the terms, the right to calculate breakage, the right to design expiry, the right to change the redemption ratio. The other side holds an app balance and the feeling that they're accumulating an asset.

So a loyalty point is only win-win if the customer treats it as a short-term coupon. It starts tilting toward the business the moment the customer treats the point as an accumulating asset, lets a balance sit for a long time, or changes their shopping behavior just to optimize a unit of value they don't actually control.

7 · Why Ordinary Users Usually Lose In The End

When the system gets abused, the merchant has a handful of defensive options. Every single one shifts part of the cost onto ordinary users.

• Devalue the points: raise the number of points needed to redeem, shrink the redeemable catalog, exclude popular items, restrict eligible hours.
• Add friction: require OTPs, face scans, fixed devices, verified phone numbers, limit point-earning to once per day.
• Tighten expiry: shorten the points' validity window to boost breakage and shrink the liability sitting on the books.
• Block stacking: disallow combining points with vouchers, stop earning points on already-discounted orders, stop earning through partner channels.
• Mass account suspensions: effective against abuse, but prone to false positives against real customers.

This is the familiar loop of every incentive system that gets gamed: simple rules make for good UX at first; then an optimizing actor shows up; then the rules get more complex; and in the end, real users pay the price with a worse experience and devalued points.

8 · A Loyalty Point Is An Economic Tool, Not A Sentiment

The name "loyalty" makes people think this is an emotional reward. But underneath the accounting layer, this is a fairly cold financial structure:

1. The business doesn't cut the price immediately, it issues a right to future consumption instead.
2. That right lives inside a closed system, so the customer must return to claim the value.
3. Some portion of that right will never be used, creating breakage and improving profitability.
4. The issuer retains the right to change the rules, so the value of a point carries inflation and devaluation risk.
5. Once points become liquid enough, they attract fraudsters, arbitrageurs, and groups exploiting rule gaps.

So should you participate in a loyalty program at all? Yes - if you treat it for what it actually is: a conditional coupon, not an accumulating asset. Points should be used early, not stockpiled like a savings account. For the business, a loyalty program is only healthy when it measures genuine incremental behavior: does a customer actually come back more because of the points, or is it merely subsidizing behavior that was going to happen regardless?

Seen through a marketing lens, a loyalty point is "customer appreciation." Seen through an accounting lens, it's deferred revenue. Seen through an economics lens, it's closed-loop money. Seen through a risk lens, it's a small ledger of debt whose terms the business retains the right to rewrite at will.