IBM is working with a Chinese credit card company to to create a blockchain-based system for trading loyalty points.

In a proof-of-concept revealed today, IBM and China UnionPay have developed a platform that allows customers to trade points earned through purchases and other incentivized behavior with one another. It's a concept that can be applied to the exchange of frequent flyer miles, mobile phone bills or gas cards.

He Shuo, director of China UnionPay’s Electronic Payment Research Institute, described the demo in a statement as a "breakthrough" in the electronic payment industry.

Shuo said in a statement:

The prototype was built on a private network of the beta-version Hyperledger Fabric network, highlighting how banks can ensure that loyalty points are only exchanged between accepted partners.

Further, it is designed to integrate online and offline channels via blockchain, enabling China UnionPay cardholders to go to supermarkets and malls equipped with special point-of-service (POS) devices and exchange bonus points for goods.

The loyalty points network is being positioned as a way to attract new customers and encourage customer loyalty through increasing the kinds of rewards available, by opening up incentives between banks.

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