KPMG’s findings indicate that tokenization is ushering in a new generation of commerce, and brings to light the strategic value of deploying blockchain infrastructure for the many business opportunities it offers – from creating new customer engagement opportunities to driving new revenue streams.
The survey offers insight into consumer awareness and attitudes towards tokenization that are useful to businesses looking to leverage the technology. KPMG’s U.S. Blockchain Leader Arun Ghosh discusses the findings and reviews current use cases for tokenization.
Digital Journal: How popular are tokens becoming?
Arun Ghosh: While tokens have been an economic staple for decades – enabling access to arcade games or rides on the subway – their potential has accelerated in recent years with the advent of blockchain technology. Blockchain-based tokens are opening doors to new types of incentive systems for engaging and shaping consumer behaviors. In addition to numerous value-driving business initiatives, tokens are enabling new ways to purchase products and services, enhancing customer experiences and strengthening customer trust and brand loyalty. In fact, our recent survey showed that consumers are becoming more open to the idea of using tokens as they become increasingly familiar with how these advanced forms of digital exchange can be used.
DJ: To what extent are consumers familiar with tokens?
Ghosh: Today, not all consumers are familiar with tokenization, but familiarity is growing. While just one-third of consumers are highly familiar with the modern-day, blockchain-based definition of tokens, the majority of that group (63 percent) appreciate the advantages of tokens as an easy form of payment, and 55 percent believe tokens will enable them to make better use of loyalty reward points.
We’re still in the early days of adoption, but tokenization is already reshaping commerce. In fact, a recent eToro survey found that 40 percent of Millennials would prefer to invest in cryptoassets in the event of a recession.
DJ: Are there demographic differences in terms of token acceptance?
Ghosh: No demographic is more accepting of tokenization than Generation Z. According to our survey, eighty-three percent of 18 to 24-year-olds surveyed identify themselves as being interested in the future of tokens. Additionally, 71 percent of Millennials or consumers age 25 to 34 are also interested in the future of tokens. Perhaps more surprisingly, over half of older Americans – age 65 and up – say they’re also interested in the future of tokens.
DJ: How is tokenization transforming the way consumers interact with each other?
Ghosh: Consumers in particular are poised to use tokens. Time and time again throughout the history of technological advancements, it’s the consumer who has propelled innovations from concept to acceptance. For example, consumers were the first to embrace ecommerce, high-speed data, and of course, smartphones, so we expect the consumer to fuel the market for tokens.
Right now, tokenization is transforming the way consumers interact with each other most commonly through social media and video games. Social media platforms can allow users to share data with advertisers in return for tokens, and blockchain video games use tokens to offer incentives or create new assets.
Digital tokens and blockchain infrastructure are not only enabling peer-to-peer transactions, but also the development of systems that embed economic incentives to inspire consumer behaviors.
DJ: How is tokenization changing the consumer to businesses relationship?
Ghosh: Thanks to the increasing adoption of blockchain technology, enterprises are uncovering new uses for tokens that can accurately and securely track the exchange of value across B2C environments.
Currently, loyalty programs are already being redefined by tokenization. In fact, our research shows that 55 percent of Americans believe tokens will enable them to make better use of loyalty reward points. Loyalty programs are one of the most fertile markets for tokenization because they enable a new form of value exchange within an existing network.
To delve further into one specific use case, an airline developed a digital wallet loyalty program based on blockchain to encourage their members to use their points in smaller amounts. By tokenizing airline miles, their members can use the digital wallet to make purchases with a variety of merchants, such as department stores, hotels, restaurants and more. This technology offers benefits to both the consumer and the business because it enhances liquidity through broader assets and transfers liabilities into current expenditures.
DJ: Is tokenization altering businesses-to-businesses transactions?
Ghosh: Digital tokens are reshaping commerce and unlocking new models for engagement between businesses. For example, blockchain tokens can trace any asset to its original entrance into the value chain. What exactly does this mean? Well, it makes it possible to track the source of all materials and components used in a finished aircraft or trace a head of lettuce to a specific field on a farm.
Overall, this improves transparency along the supply chain and improves partnerships and business efficiencies. Furthermore, in the financial services space we have seen movement by organizations to deploy tokens to facilitate value exchange between different businesses within their own global operating model and across banking institutions, which traditionally settle value exchanges through central intermediaries.