cashbackAPP Increases Net Margins by 25% with Aventus
cashbackAPP is a global rewards network that helps retail merchants drive sales by offering cash back to their customers when they spend using their connected debit or credit cards. It integrates several brands and retailers, including connections with over 27 financial organizations, which process pos transactions for 90% of merchants globally (Visa Europe and Ecocash in Africa, to name a few).
cashbackAPP is active across 11 countries, with over 100k live locations and over 12 million customers.
Prior to its partnership with Aventus, cashbackAPP allowed users to register with a debit card in their apps to receive cash back on their purchases at participating retailers. These merchants benefit from increased sales volume generated from cashbackAPP’s extended user base. by signing up to the network, merchants are invoiced monthly for the cashback they owe registered users, plus a small commission to cashbackAPP. Once users accumulate a minimum of £50 (or the equivalent value in the relevant country’s official currency), they can withdraw the value via bank transfer.
This traditional cashback model generated sizable revenue for cashbackAPP, but came with complex problems.
Find out how Aventus helped resolve these problems with a tailored solution using web3.
1. Balance Sheet Liability and Merchant Cash Flow
cashbackAPP users receive cash rewards owed by merchants monthly. However, users can acquire over the £50 threshold at any time. This creates a significant risk period in any monthly cycle whereby cashbackAPP retailers may not have sufficient funds on hand to honor all users cashing out. Merchants may default on these payments owed, further exacerbating this risk.
Previously, to mitigate this risk, stock was collected as collateral from merchants. This was an expensive operational process, and acquiring short-term financing from banks came with sub-optimal terms, given the large liability on their balance sheets of cash owed to users.
cashbackAPP companies no longer collect fiat from merchants; instead, merchants immediately credit users with ‘cashback’ tokens. This means it can collect its commissions from merchants on a less sensitive timeline. Since no fiat currency is owed to users in the new system, the liability on its balance sheet and any associated collateral processes are also eliminated. This solution, powered by Aventus, significantly reduced back-office costs for cashbackAPP retailers, making the need for short-term financing options redundant and resulting in a cleaner and more attractive balance sheet.
2. Diminished Lifetime Value
cashbackAPP retailers had to implement the £50 threshold for users to combat the cash flow issues they had. However, the average user spend is £20, and the average cashback rate is 5–10%, meaning a user would have to spend over 25 times to even see value from the system. This hindered cashbackAPP’s customer lifetime value and revenue since it would see a large drop-off of users around the £10–20 balance amount.
With blockchain, users' need for a £50 cash-out threshold was eliminated since users receive ‘cashback’ tokens immediately and can re-spend these at any point. This resulted in significantly less user drop-off and a higher lifetime value per customer.
3. Treasury Management and Transfer
cashbackAPP retailers had periods of significant cash-on-hand from fulfilling accounts payable and complicated cash flow cycles that limited users exiting their systems. This meant it needed to invest significantly into treasury management strategies to create greater overheads. Traditional fiat infrastructure has high costs associated with bank transfers – therefore, costs associated with users cashing out and collecting cash from merchants are also high, further increasing their margins.
Aventus eliminated expensive treasury management solutions and costly bank transfers from back office costs for cashbackAPP companies. They no longer collect and distribute fiat currency from merchants to users, eliminating expensive treasury management solutions and bank transfers from back office costs, significantly reducing operational overheads.
With Aventus, cashbackAPP has seen its net margin increase by 25% and has reduced its balance sheet debt by as much as 80%.
Bish Smeir, CEO of cashbackAPP, said: “It’s incredible how Aventus has improved cashbackAPP for every one of our stakeholders. It’s helped make our business more effective than ever before, and now implemented will enable us to rapidly expand.”