Loyalty glossary · 1. Program mechanics and currency (40)
Points Transfer
A points transfer is the conversion of one loyalty programme's points into another programme's currency, usually through a partner relationship, at a rate set by the operator. It moves value between programmes without a cash redemption.
Points transfers are sold as flexibility, but they are a pricing event. The sending programme fixes a conversion ratio that determines how many partner points a member receives for each home point, and that ratio is the whole deal.
The ratio is not a convenience. It is the operator's valuation of its own liability, and it usually runs below the value the home programme offers on its own redemptions. A member who accrues points in a programme and transfers them out is accepting a discount to avoid the home catalogue.
Work the numbers on a simple transfer. A home programme sells 10,000 points for 100 dollars, so each point is worth 1 cent. The operator sets a transfer ratio of 2 points to 1 point in the partner programme, so those 10,000 points become 5,000 points in the partner programme. If the partner redeems points at 1 cent each, the member receives 50 dollars of value, a 50 percent loss on the 100 dollars spent.
Transfers also shift breakage risk. Points that leave the home programme are no longer its liability, which is why operators with large co-brand card portfolios promote transfers hard. The partner takes on the redemption obligation, but at the discounted rate that the home programme set, so the partner often earns the spread.
The practical rule is to treat a points transfer as a redemption at the transfer rate, not as a free exchange. Compare the transfer value to the best redemption in the home programme, and the transfer only wins if the partner's catalogue is materially better after the conversion loss. In most programmes it is not.