Loyalty Programs: How Arcade Solves Reward Liability Costs

Customer loyalty programs are often presented as a marketing success story. More loyal members, better conversions, and repeat purchases.       

What receives less attention is that each reward a customer earns is a future cost to your business. The moment loyalty currency enters circulation, the business assumes a financial obligation it will eventually need to honour. Whether through discounts, free upgrades, or exclusive benefits. 

At a modest scale, this seems manageable, but at the enterprise level, it’s a tough balance-sheet discussion.     

Consider a loyalty app with 10 million active members. If each member accumulates just $5 of unredeemed rewards, the business is carrying $50 million in future costs.  

For CFOs, the pressing question is whether the economics improve as the program scales. Or whether every incremental member, transaction, and reward simply adds to cost margins.    

Keeping Up with Rewarding Loyalty   

Studies show that loyal customers want richer rewards, such as real cashback and discounted coupons. Instant gratification through real-time rewards is a baseline. 

Now, the expectations seem costlier to sustain at scale because the loyalty model remains unchanged.   

Take Delta, when it attempted to scale back elements of its SkyMiles program to save costs, customer backlash was swift enough to force a reversal. Years later, the airline continues to adjust the program carefully, reinforcing customer feedback. 

This example highlights a challenge facing loyalty leaders across industries: once a benefit becomes part of the customer experience, removing it feels like taking the value away rather than correcting the margins.   

The Breakage Trap 

Data shows that customers who actually redeem rewards tend to be much more valuable. Loyalty members who claim a reward deliver roughly 6.3 times the lifetime value of those who never redeem.  

Yet rewards liability is the single largest expense in the loyalty model. It’s also harder to predict. If a large number of customers redeem their points at once from a successful campaign, it could create a significant hit. Enough for a loyalty meeting to turn into a ‘Profit & Loss’ meeting. 

Recent analysis pegs global unredeemed points in the trillions, with 48.8% lying idle on balance sheets. In the US, Gartner reported over $140 billion in outstanding liability. 

Naturally, accounting teams scrutinise the budget each quarter when loyalty marketers plan aggressive retention campaigns or premium tier upgrades.  

Pushing breakage is counterintuitive to the program’s goals. Some companies design their programs to encourage it – short expiry windows, super-complicated redemption process, high-point thresholds. 

Getting customers not to use their points might look good on paper, but it leads to disengagement and churn.

• Customer lifetime value deteriorates
• Enterprise brand value reduces  
• Customers stop believing in the program 

What if an external revenue stream funded your rewards, while your app gained more sessions, app opens, and higher lifetime value in return?   

Understanding adjoe Arcade: Playing Your Way to Profit 

adjoe Arcade is a gamified loyalty layer that flips the script on rewards spending. Instead of funding every point from your own margin, Arcade channels game advertising dollars to cover the cost.  

Arcade presents users with top mobile games: users play the games to earn points that are prepaid by premium game studios. Every time a customer plays a game via Arcade, the brand earns ad revenue that underwrites the point reward.     

Enterprise brands only distribute rewards when the engagement that earned them has been paid for. It ensures any new rewards can be absorbed without inflating the loyalty currency, eroding gross margin, or adding a cent to your liability.     

adjoe Arcade: How does the User Journey Work?   

Arcade sits inside your existing app, introduced at the point where a loyal user is already engaged. It appears as an additional way to earn points, alongside purchase-based rewards.  

A user opts in, browses personalised mobile games, and picks one to play. 

From that moment, their in-session engagement, time spent, and activity within the game are tracked. That engagement is what game publishers are paying for.  

That payment is tied to real user activity and flows through the system as revenue from game studios. 

A portion is then converted into your loyalty points according to rules you set in advance, customised to fit your loyalty ecosystem. The points land directly in the user’s loyalty account. 

Say a customer needs an extra 150 points to unlock a free upgrade. They play a game they enjoy, earn the points, and get there. Not a cent of it comes out of your loyalty budget. However, you gain app engagement and an additional revenue stream.

Every step is traceable and auditable, from engagement trigger to point issuance with defined limits. 

Proof in Numbers

One case study with Fetch Rewards, the largest US-based rewards app, showed that after adding Arcade, daily app opens jumped about 5.5% month-over-month, and users’ lifetime value rose 10%.  

Other case studies show similar effects; more frequent app logins, higher click-throughs on promotions, and greater redemption of points, all funded externally.  

Brands across regions have reported similarly strong commercial outcomes. MyB, a Korean mobile app, achieved 3x revenue growth and a 210% increase in ARPDAU after introducing Arcade. Beem observed 11% higher ARPU among Arcade users compared with non-users. 

LINE Taiwan saw comparable results. After integrating Arcade’s offerwall into its LINE POINTS mission hub, the platform recorded over 300,000 daily active users browsing games.   

It led to 40,000+ game downloads in the first month alone, and 4.3 million LINE POINTS issued since launch. Users returned more frequently, and sessions became longer and more goal-oriented.   

Turning Loyalty Liabilities into Revenue

The loyalty industry has long treated points liability as a cost of doing business, something to provision for and keep under control with complex reward structures. 

What we suggest is that this structural assumption is worth revisiting. When the cost of a reward can be underwritten by a third party before it reaches the balance sheet, the conversation shifts from liability management to revenue optimization.  

For finance leaders who have spent years watching loyalty budgets expand without a clear offset, that distinction matters.
Your loyalty differentiator is adjoe Arcade.

See how Arcade fits into your enterprise loyalty stack. Book a call with adjoe.