Investment banking giant JPMorgan Chase wants to help turn airline and hotel loyalty points into an asset class akin to stocks or corn futures.
The bank is working with Affinity Capital Exchange (ACE) to let companies turn rewards programs into a standardised, exchangeable currency to be traded by fund managers and used as collateral to raise capital, according to a statement on Thursday. Through the partnership, massive loyalty programs can be converted into pieces, or “reserve points,” sold to investors like hedge funds or banks on the ACE marketplace, and later traded on the same venue.
“We’re essentially creating an asset class,” Andreas Pierroutsakos, a managing director at JPMorgan, said in an interview. Traditionally, companies sell points directly to banks. “But there are many other investors that want access,” he said. “This is opening the door for that.”
Frequent-flyer programs generate billions in revenue for the largest airlines through agreements in which carriers sell their points to banks which award them to credit-card customers.