What is the function of escrow points in a loyalty program?

Escrow points play a crucial role in loyalty programs by delaying the crediting of points after transactions. This mechanism is typically utilized to ensure that the points awarded are tied to the fulfillment of certain conditions or time frames after a purchase. For example, a transaction may need to be confirmed or a return period may need to lapse before points are officially credited to a member's account. This approach helps mitigate issues such as fraud or returns that could otherwise affect the loyalty program’s integrity.

By utilizing escrow points, loyalty programs can manage risk while still maintaining member engagement. Members are aware that they will eventually receive the points, which incentivizes future purchases while ensuring a balance between rewarding loyalty and managing program sustainability. This creative structuring reinforces the program's longevity and reliability for both the business and the members involved.