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February 13, 2023

Client Spotlight: CashbackAPP

Learn how Aventus’ offering helped this cashback provider reduce balance sheet debt by 80% and increase net margins by 25%.

Cashback schemes have become a popular mechanism. Merchants use them to foster brand loyalty and provide incentives to buyers. Many consumers like cashback rewards because, unlike loyalty points, they are tangible, easy to understand and easy to value.

In fact, every year, consumers spend two trillion dollars’ worth of merchant promises in the form of discount vouchers, points, cashback and gift cards.

But cashback schemes are not without their problems. Delivery is often slow and inefficient, and people have to wait to get their money back, sometimes months. Additionally, these schemes, which are centrally controlled, also expose consumer data, like spending patterns.

And for merchants, cashback rewards are liabilities on their balance sheet, since they owe their customers the value of the rewards. While it can be a successful business, platform providers like cashbackAPP face challenges managing the collateral used to mitigate merchant counterparty risk, which in turn requires financing its cash flow as well as handling a fairly complex operational setup.

The Client

CashbackAPP is a global rewards network which helps retail merchants drive sales by offering cash back to their customers when they spend using their connected debit or credit cards.

It operates across 11 countries and is linked to several brands and retailers, including connections with over 27 financial organisations, including Visa, who process POS transactions for up to 90% of the world’s merchants.

CashbackAPP is active across 11 countries with over 100k live earn and burn locations and over 12M linked customers.

The Challenge

CashbackAPP approached Aventus with two problems:

User experience: traditional banking technology does not allow for the speed and cheap settlement of micro transactions that Aventus’ blockchain solution could provide. Previously, CashbackAPP users were only able to withdraw their funds once they had accumulated a minimum of £50.

Debt obligation: CashbackAPP has a debt obligation to its users, and has to invoice businesses for this, which they only did on a monthly basis. Meanwhile, some businesses go out of business and default, and others have cash flow delays and other inefficiencies.

Our Approach

We advised on the token methodology and economic modelling and provided all blockspace and tooling needed for the innovative two-token model via the Aventus Network.

First, there is the Vow token, a freely floated cryptocurrency based on the Ethereum ERC-777 fungible token standard.

Then there are the vcurrencies: tokens issued by individuals or companies that are valued at par with different fiat currencies. One vUSD is worth one US dollar, one vGBP is worth one British pound, and so on.

Vcurrencies, as used by cashbackAPP (or in other rewards schemes), behave like stablecoins, in that they provide a stable digital discount voucher equivalent to a fiat currency that can be used on a blockchain as a means of payment. Unlike large-scale stablecoins like USDC, vcurrencies are not backed by a centralized organization. Instead, they are minted and backed by the merchants who want to take part in the cashback scheme.

The Results

For consumers, vcurrencies mean immediate rewards, as the tokens are deposited into the consumers’ wallet at the time of sale. This also means that no private data is exposed.

For merchants, it means there is no more need for an expensive rewards infrastructure. The vcurrencies also do not appear on merchant’s balance sheets. And while there is still collateral to pay, in the form of the 20% Vow in escrow, these costs are fairly low and highly predictable.

Following six months of testing on the Aventus Network testnet, we concluded that we will continue to increase our net margins by almost 25% long-term with the introduction of the Aventus Network mainnet.

Bish Smeir, CEO of CashbackAPP

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