Home Coins Aventus (AVT) Retail rewards company, cashbackAPP, utilising the Aventus Protocol | by Aventus Network...

Retail rewards company, cashbackAPP, utilising the Aventus Protocol | by Aventus Network | Sep, 2020

Prior to utilising the Aventus protocol, CashbackAPP allowed users to register with a debit card in their apps, and receive cash back on their purchases at participating retailers. These merchants benefit from increased sales volume generated from cashbackAPP’s extended user base. By signing up to the network, merchants are invoiced on a monthly basis for the cashback they owe registered users, plus a small commission to cashbackAPP. Once users accumulate a minimum of £50 (or the equivalent value in the relevant country’s official currency), they are able to withdraw the value via bank transfer. Whilst this traditional cashback model generates sizable revenue for cashbackAPP, it came with complex problems impacting their revenue, cashflow, and back-office costs.

The solution? Utilising the Aventus Protocol to help cashbackAPP solve these three problems by eliminating the bulk of their fiat-based cashback system and replacing it in favour of tokenised representations of currency and a sophisticated economic model to align the incentives of all participants.

In the new system, a cashbackAPP user’s card used for purchases at a participating retailer allowed the user to obtain an immediate credit of ‘cashback’ tokens to their account. The user was then immediately able to re-spend these ‘cashback GBP’ tokens at any other retailer in the cashbackAPP ecosystem. Merchants no longer “owed” users via previous cashbackAPP any fiat currency mechanism; instead, their condition to join the network was simply agreeing to accept back as many ‘cashback’ tokens as they issued out in a given year for goods and services.

In addition, Users and merchants alike can buy ‘cashback’ tokens on an open market; since these trade at a slight discount to fiat (as their utility is relatively less), users can purchase these and spend them at merchants to realise the discount, and merchants can acquire these to offset any delta in ‘cashback’ tokens issued vs. received.

Let’s go into some more detail:

Cash rewards owed by merchants are received by the users on a monthly basis. However, users can acquire in excess of the £50 threshold at any point in time. This creates a significant risk period in any monthly cycle whereby cashbackAPP retailers may not have sufficient funds on hand to honour all users cashing out. Merchants may default on these payments owed, further exacerbating this risk.

Previously, in order to mitigate this risk stock was collected as collateral from merchants. This was an expensive operational process, and acquiring short term financing from banks came with sub-optimal terms given the large liability present on their balance sheets of cash owed to users.

CashbackAPP companies no longer collect fiat from merchants; instead, merchants immediately credit users with ‘cashback’ tokens. Meaning they can collect their commissions from merchants on a less sensitive timeline. Since no fiat currency is owed to users in the new system, the liability on their balance sheet is also eliminated, along with any processes associated with collateral. This solution, powered by the Aventus Protocol, significantly reduced back-office costs for cashbackAPP retailers, making the need for short term financing options redundant, and resulted in a cleaner and more attractive balance sheet.

CashbackAPP retailers had to implement the £50 threshold for users to combat the cash flow issues they had. However, the average user spend is £20 and the average cashback rate is 5–10%, meaning a user would have to spend over 25 times to even see value from the system. This hindered cashbackAPP’s customer lifetime value and therefore revenue, since they would see a large drop-off of users around the £10–20 balance amount.

This is where the Aventus Protocol stepped in to help. The need for a £50 cash-out threshold for users was eliminated, since users receive ‘cashback’ tokens immediately and are able to re-spend these at any point. This resulted in significantly less user drop-off and therefore a higher lifetime value per customer.

CashbackAPP retailers had periods of significant cash-on-hand from fulfilment of their accounts payable paired with a lack of users exiting their systems. This was due to the complicated cash flow cycles. Meaning they needed to invest significantly into treasury management strategies, creating greater overheads. Traditional fiat infrastructure has high costs associated with bank transfers; therefore, costs associated with users cashing out and collecting cash from merchants was also high, further increasing their margins.

CashbackAPP companies no longer collect and distribute fiat currency from merchants to users, eliminating expensive treasury management solutions and costly bank transfers from back office costs, significantly reducing operational overheads.

Since utilising the Aventus Protocol CashbackAPP has experienced an 8% increase in net margins in just 2 months of going-live. Now, after almost 6 months of operation in two territories, cashbackAPP’s net margin increase is closer to 25%.

“It’s incredible how the Aventus Protocol has improved cashbackAPP for every one of our stakeholders. It’s helped make our business more effective than ever before, and now implemented will enable us to rapidly expand.”

Bish Smeir, CEO cashbackAPP

Read the original article here

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