Issue #17: Do we Need to Save Ourselves from Ourselves?

It’s no secret we have an industry reputation problem.

A recent USA Today article titled “Why travel rewards programs feel worse than ever” called them “prison” and “quicksand.” Harsh…but not entirely inaccurate. The author interviewed travelers who hoarded points for a special trip, only to find they needed 3x the amount they expected and that their “free” redemption came with hundreds of dollars in surcharges.

Skift piled on, reporting that the top two hotel programs — Marriott and Hilton — have a combined $7B (yes, with a B) in unused points sitting with members. The number is notable not just for the sheer size of the programs, but for how many points are going unused. Yes, members are hoarding, but they are also finding points harder to use.

The negative headlines continue to add up: Business Insider’s “Customer Loyalty is a Sham” and Forbes’ “Why Customer Loyalty Programs are Missing the Mark” are just a few more.

The industry response tends to focus on tactical fixes: focus on personalization! do more gamification! be less transactional! more experiential! I’m calling BS. None of those things will bring trust back to programs unless we fix the roots. And we’ve shown over the past 50 years that we don’t know how to take care of said roots.

Which brings us to a question most industry commentary avoids: could some level of regulation actually improve loyalty programs?

When regulation enters the loyalty conversation, it usually comes through the lens of credit cards and interchange fees. The concern is straightforward: interchange revenue helps fund rewards programs, and lowering those fees could reduce the richness of rewards.

Australia is often cited as an example. Interchange caps introduced in the early 2000s and tightened in 2016 reduced the economics supporting rewards, and Australian credit cards today tend to offer less generous earn rates than their U.S. counterparts.

The U.S. has already experienced a version of this dynamic. When the Durbin Amendment capped debit interchange fees in 2011, debit rewards programs largely disappeared within a few years. With less revenue available to fund incentives, issuers shifted focus to credit cards and other products where economics were more favorable.

It is understandable why the industry reacts strongly to proposals that could compress rewards economics. No one wants to see fewer benefits for customers or fewer tools available to drive engagement.

But focusing exclusively on interchange risks missing the broader issue. Everyone from The Points Guy to Joe-Schmo Travel Influencer is saying ‘hands off our points’. But have consumers missed the forest through the trees in fighting for the right to earn more points when they’ve just become less valuable?

Perhaps this is why the regulation framing needs to change.

For many consumers, loyalty benefits are no longer viewed as a perk but more of a necessity. Points function as digital coupons. They are the way to get to the front of the line. They are how consumers gain access to limited items or preferred pricing. For many consumers, loyalty status is the unlock for anything good, or just remotely better.

And we—the industry—created this.

We market points and benefits as not only valuable but worth optimizing. But we also allow ourselves as program operators the ability to reprice, restrict, and move the goalposts to ensure economics remain sound (or at least attractive enough to keep the CFO from asking questions 😉).

These program changes are have eroded trust in programs, led to less loyal consumers, and given our industry a bad name.

This dynamic is not limited to travel or credit cards. It appears across retail, restaurants, subscription services, and more such as…

….points that disappear no matter how engaged you are
….redemption rules that restrict how rewards can be combined
….”exclusive access” benefits that only 5 people can earn
….dynamic pricing that makes value impossible to understand

Individually, each decision may make economic sense. Collectively, they piss off the very consumer we are trying to drive to be loyal.

As a marketer, my initial instinct is to prefer flexibility over regulation. Markets evolve quickly, customer expectations change, and programs need the ability to adapt. Excessive regulation can create compliance burdens that slow innovation and encourage safer, less differentiated program design.

There is also a legitimate concern that poorly structured regulation could reduce funding for rewards without addressing the underlying issues that frustrate customers. So, I fully get the argument against it.

But the absence of guardrails has also created challenges. When programs can change value frequently or introduce complex restrictions, customers may question whether loyalty is truly worth the effort. Some degree of structure could help create more consistent expectations and reinforce trust in the value exchange.

Here’s a short list of things I’d be ok regulating:

That last idea may be the most controversial. If programs publicly reported metrics such as how many upgrades were granted, how many rewards expired unused, or what percentage of available inventory was actually accessible, it would likely influence how programs are designed.

Would these ideas create additional complexity for program operators? Almost certainly. But it could also reinforce discipline around delivering value that customers can reasonably access.

The objective should not be to regulate loyalty programs into the graveyard or eliminate the economics that make rewards possible. But trust is foundational to loyalty. If customers increasingly believe the value exchange is unpredictable, engagement declines regardless of how many points are offered.

Thoughtful guardrails could help establish clearer expectations, encourage more transparent program design, and ultimately support healthier long-term relationships between brands and customers.

The question is not whether regulation is inherently good or bad. The question is whether the industry can maintain trust without some shared standards for how value is defined and delivered.

What’s your POV? Are guardrails unnecessary interference, or could they help strengthen loyalty programs for both customers and operators?