That inviting notification or mail “Earn 50,000 Bonus Points” is an offer that gets you to the
loyalty points market, a hidden with billion dollars financial exchange where points are not
just rewards but more than just incentives; they function as a type of digital currency within
the airline ecosystem, allowing cashless transactions for services, upgrades, and tickets. This
system operates behind your daily expenditures as an advanced B2B marketplace,
transforming customer loyalty into a tradable financial asset. It’s a secret financial layer few
consumers ever see.

The basic truth that changes everything is that points are airline debt, not rewards. To be more
accurate, an airline’s balance sheet records every mile covered it issues a liability – so from
the airline’s perspective, points notification signals say, “We owe you a future service (like a
ticket) redeemable on your next travels with us”—treated as a balance sheet liability. Because
these points become a part of corporate debt. When one individual considers points as free,
then you are twisting the fact that they are regulated financial instruments which generate
commitments worth billions for the companies who issue and start these points systems.

Different roles are used in this hidden economy. The key players are a specialised group, at
first sellers, which are the hotel companies like Marriott, and airline companies like Delta,
which function or show themselves as central banks only creating their own branded money.
Further, banks and credit card firms like American Express, HDFC, and Axis Bank, which
function as institutional investors, are the bulk buyers challenging them, acting as institutional
investors who need large reserves of this money. The important middleman role is what
connects them, through different means and websites which help them in acting as the online
marketplace for pricing, selling, and settling of these private currencies between the
businesses.

The wholesale transaction—banks purchasing points in bulk from airlines—is the engine of
the market. This is significant corporate contracting, not a casual purchase. For instance, in a
single $4.2 million (₹386.17 million) deal, Citibank might pre-purchase 300 million American
Airlines points at a cost of $0.014 per point. By obtaining the bank’s entire “reward inventory”
through a single negotiated corporate agreement, this bulk acquisition takes place long before
you earn your first mile.

The smooth process you come across is fuelled by this transaction: You use your credit card
to spend. From its stockpile of pre-purchased points, your bank awards you. Later, you
redeem those points for airfare. In the end, settlement takes place in the background: for each
point you redeemed, the airline charges the bank the pre-arranged wholesale rate. What
appears to be a personal gift is the last stage of a corporate supply chain that has been pre
funded.

This mechanism is driven by two strong motivations. The main motivation for airlines is
quick, significant cash flow. Loyalty schemes are frequently more profitable than actual flight
operations since selling points offer significant upfront funds. They create what is effectively
an interest-free loan with built-in profit margins by receiving useful cash now while delaying
the cost of providing future trips for years.

The goal for banks is to acquire and retain premium customers. The best loyalty tool is a point
system. Consumers who pursue travel rewards usually pay yearly fees voluntarily, spend two
to three times more on their cards, and show exceptional brand loyalty. Increased transaction
income and long-term customer value are two ways that the investment in purchase points
yields remarkable returns.

However, consumers are in serious danger with this system: points devaluation. Airlines and
hotels can—and frequently do—individually raise the number of points needed for rewards,
just as central banks have the power to induce inflation. The intrinsic risk of investing in a
private, unregulated currency is this value degradation.

Ultimately, this model represents a masterclass in B2B financial strategy. It demonstrates how
to build captive economic systems, transform intangible loyalty into bankable assets, and
create mutually beneficial revenue streams through sophisticated partnership engineering.

The crucial insight is this: every “free points” promotion represents the consumer-facing
endpoint of a completed billion-dollar corporate transaction. You’re not just earning
rewards—you’re participating in the final distribution phase of a sophisticated financial
market where your loyalty has already been packaged, priced, and sold. Understanding this
loyalty points market reveals that your dream vacation isn’t a gift; it’s the carefully calculated
outcome of high-stakes corporate finance.

By Tanish Mahan Gulati