Points Expiry

Points expiry is both a financial necessity and a strategic engagement tool in loyalty programs. BigLedger’s expiry engine provides sophisticated configuration options that go far beyond simple time-based expiration, enabling businesses to balance financial liability management with customer satisfaction and program engagement.

Why Points Expire

Points expiry serves multiple business objectives that make it essential for most loyalty programs:

Financial Liability Management

Outstanding points balances represent a financial liability on the balance sheet. Without expiry, this liability grows indefinitely:

Example Liability Growth Without Expiry:

Year 1: 1,000,000 points issued → Liability: $10,000 (at $0.01/point)
Year 2: 1,500,000 points issued → Liability: $25,000 (cumulative)
Year 3: 2,000,000 points issued → Liability: $45,000 (cumulative)
Year 5: 3,000,000 points issued → Liability: $95,000 (cumulative)

Without expiry and with only 60% redemption, liability becomes unmanageable.

With Strategic Expiry:

Year 1: 1,000,000 issued, 600,000 redeemed, 300,000 expired → Liability: $1,000 (100,000 active)
Year 2: 1,500,000 issued, 900,000 redeemed, 450,000 expired → Liability: $2,500 (250,000 active)
Year 3: 2,000,000 issued, 1,200,000 redeemed, 600,000 expired → Liability: $4,000 (400,000 active)

Expiry keeps liability manageable and predictable.

Engagement and Urgency

Points with expiration dates create healthy urgency that drives member engagement:

Members check their account more frequently
Redemption activity increases as expiry approaches
Earning activity increases to maximize value before expiry
Program stays “top of mind” through expiry communications

Inactive Account Management

Members who stop engaging with the business but retain point balances create “dead” liability. Expiry provides a mechanism to clean up inactive accounts while giving members fair warning and opportunity to use their points.

Program Economics

Breakage (points that expire unredeemed) improves program economics and allows businesses to be more generous with earning rates:

Program Economics Example:

Without Breakage:
- Earning rate: $1 = 1 point
- Redemption value: 100 points = $1
- Program cost: 100% of points issued must be funded

With 30% Breakage:
- Same earning and redemption rates
- Effective cost: Only 70% of points redeemed
- Can afford to be more generous or maintain profitability

Types of Expiry Rules

BigLedger supports multiple expiry rule types that can be combined to create sophisticated policies:

Fixed-Term Expiry

Points expire a fixed duration after they are earned.

Configuration Example:

Rule: Points expire 24 months after earning date
Implementation: Each points lot tracks earning date
System: Automatically expires points on earning date + 24 months

Use Cases:

Standard expiry policy for most programs
Straightforward for members to understand
“Earn by March 2023, expire March 2025”

Member Experience:

Points Earned: March 15, 2023 → 1,000 points
Expiry Date: March 15, 2025
Member sees: "1,000 points expire on March 15, 2025"

Advantages:

Simple to communicate
Predictable for financial planning
Fair to members (generous time window)

Considerations:

Must track expiry date per points lot (batch of points earned together)
Members with infrequent earning may lose track of expiry dates
Bulk expiry events can create customer service spikes

Rolling Expiry with Activity Extension

Points expire after a period of inactivity, but any account activity resets the expiry clock.

Configuration Example:

Rule: Points expire after 12 months of account inactivity
Activity Definition: Any purchase, redemption, or points earning event
Reset Behavior: Any activity extends all points by 12 months

Use Cases:

Programs prioritizing engagement over liability control
Service businesses wanting to maintain customer relationships
Premium tiers as a benefit (never expire if you stay active)

Member Experience:

Last Activity: January 15, 2024
Current Date: November 18, 2024
Expiry Date: January 15, 2025 (12 months from last activity)

Member makes purchase: November 20, 2024
New Expiry Date: November 20, 2025 (12 months from new activity)
All existing points get extended

Advantages:

Rewards active customers with indefinite points validity
Encourages consistent engagement
Activity extension feels generous and fair

Considerations:

Less predictable liability (active members never expire)
Requires activity tracking and expiry recalculation
Must clearly define what counts as “activity”

Calendar-Based Expiry

Points expire at a specific calendar date regardless of earning date.

Configuration Example:

Rule: All points expire on December 31 of the year earned
Implementation: Points earned any time in 2024 expire Dec 31, 2024
System: Batch expiry process runs annually

Use Cases:

Programs with annual membership cycles
Seasonal businesses (ski resorts, summer camps)
Simplifying financial accounting (annual liability reset)

Member Experience:

Points earned January 2024: Expire December 31, 2024 (11 months validity)
Points earned November 2024: Expire December 31, 2024 (1 month validity)
Member knows: "Use points by end of year"

Advantages:

Simple annual cycle
Clear communication (use by year-end)
Predictable expiry date for budgeting

Considerations:

Unfair to members earning late in period
Creates December redemption rush
Aggressive for long-term liability management

Tiered Expiry

Different expiry rules apply based on member tier or points currency.

Configuration Example:

Bronze Members: Points expire 12 months after earning
Silver Members: Points expire 24 months after earning
Gold Members: Points expire 36 months after earning
Platinum Members: Points never expire

Use Cases:

Tier benefit differentiation
Rewarding loyalty with longer validity
Competitive differentiation in premium tiers

Member Experience:

Member: Sarah (Gold tier)
Points Balance: 15,000 points
Expiry: 36 months from earning (some earned in 2022, some in 2024)

Sarah upgrades to Platinum
New Expiry: All points now never expire
Benefit: Lifetime validity as Platinum tier benefit

Advantages:

Strong tier differentiation
Motivates tier progression
Rewards best customers with peace of mind

Considerations:

Complex when members change tiers
Must decide if new tier rules apply retroactively to old points
Communication must be clear about tier-based differences

Selective Currency Expiry

Different points currencies have different expiry rules.

Configuration Example:

Loyalty Points (Base): Never expire
Bonus Points (Promotional): Expire 6 months after earning
Gift Points (Transferable): Expire 90 days after receiving
Partner Points: Expire 18 months after earning

Use Cases:

Matching expiry to currency purpose
Creating urgency for promotional points
Managing partner liability separately

Member Experience:

Member Balance Summary:
- Loyalty Points: 10,000 (never expire)
- Bonus Points: 2,000 (expire June 30, 2024)
- Gift Points: 500 (expire January 15, 2024)

Member sees urgency to use Bonus and Gift points first

Advantages:

Flexibility to match currency to purpose
Promotional points can be aggressive (high breakage) while base is generous
Clear liability separation

Considerations:

Must communicate different expiry rules clearly
Members may be confused by multiple expiry dates
System must track expiry per currency

Expiry Configuration Examples

Example 1: Conservative Standard Program

Business Context: Established retail loyalty program prioritizing customer satisfaction.

Expiry Policy:

Base Expiry: Points expire 36 months after earning
Activity Extension: Any purchase extends expiry by 12 months
Tier Exception: Platinum members' points never expire
Grace Period: 90-day grace period with warning notifications

Why This Works:

36 months is generous and member-friendly
Activity extension rewards engagement
Platinum benefit creates tier aspiration
Grace period reduces negative reactions

Financial Impact:

Moderate breakage rate (~20-25%)
Predictable liability with long time horizon
Lower customer service complaints

Example 2: Aggressive Promotional Program

Business Context: New brand launch using loyalty to drive trial and rapid engagement.

Expiry Policy:

Welcome Bonus Points: Expire 90 days after enrollment
Purchase Points: Expire 12 months after earning
Referral Bonus: Expire 6 months after friend's first purchase
No Extensions: Expiry is fixed, no activity extensions

Why This Works:

Short expiry creates urgency to try products
Referral expiry motivates friend activation quickly
Aggressive breakage improves program economics during growth phase
Can offer generous earning rates due to high breakage

Financial Impact:

High breakage rate (~40-50%)
Low liability burden during growth
Drives rapid member activation

Example 3: Premium Subscription Model

Business Context: Paid membership program where annual fee is primary revenue.

Expiry Policy:

Member Status: Active subscription
Points Earning: Cash-back points on purchases
Expiry During Active Status: No expiry while subscription active
Expiry After Cancellation: Points expire 30 days after subscription cancels
Reactivation: Points restored if subscription renewed within 6 months

Why This Works:

No expiry during active status is a membership benefit
Post-cancellation expiry motivates renewal
Restoration grace period allows customer to return without losing value
Aligns expiry with subscription lifecycle

Financial Impact:

Low breakage for active members (good for retention)
Breakage occurs when members churn
Liability tied to active subscriber base

Example 4: Multi-Currency Strategy

Business Context: Complex loyalty ecosystem with multiple currency types.

Expiry Policy:

Base Loyalty Points:
- Never expire for active members
- "Active" defined as any activity within 24 months
- Expire 24 months after last activity for inactive members

Bonus Points:
- Expire 12 months after earning
- No extensions
- Used first in redemption (FIFO)

Partner Points:
- Expire 18 months after earning
- Must be converted to Base Loyalty Points to extend
- Conversion ratio: 3 Partner Points = 1 Base Loyalty Point

Gift Points:
- Expire 90 days after receiving
- Cannot be extended
- Highly transferable to encourage viral spread

Why This Works:

Each currency serves different purpose with appropriate expiry
Base points never expire rewards core loyalty
Bonus and Gift points create urgency
Partner expiry reflects different liability source
Conversion to base extends partner points (drives engagement)

Financial Impact:

Base points: Low breakage (~10%)
Bonus points: High breakage (~35%)
Partner points: Moderate breakage (~25%, or converted)
Gift points: Very high breakage (~60% - many never claim)
Overall balanced liability management

Implementation Considerations

Lot-Based Tracking

Points expiry requires tracking when each batch (lot) of points was earned:

Points Lot Table Structure:

Lot ID: PTLOT-8829301
Member ID: LOY-443829
Currency: Loyalty Points
Points Earned: 1,500
Earned Date: March 15, 2024
Expiry Date: March 15, 2026 (24-month rule)
Current Balance: 1,200 (300 redeemed)
Status: Active

When members redeem points, system determines which lot to deduct from based on redemption rule (FIFO, closest to expiry, member choice, etc.).

Example Redemption:

Member has three lots:
Lot A: 1,000 points, expires June 2024
Lot B: 2,000 points, expires September 2024
Lot C: 1,500 points, expires January 2025

Member redeems 1,500 points using FIFO (first to expire first):
- Lot A: Fully redeemed (1,000 points)
- Lot B: Partially redeemed (500 points), 1,500 remaining
- Lot C: Untouched, 1,500 remaining

Remaining balance: 3,000 points
Next expiry: 1,500 points on September 2024 (Lot B)

Expiry Processing

Scheduled Batch Processing:

Daily job checks for lots past expiry date
Expired points moved from active balance to expired balance
Expiry transactions recorded for audit trail
Member notification triggered

Real-Time Expiry:

Expiry check before transaction processing
Prevents redemption of expired points
Shows accurate available balance
May have performance considerations

Best Practice: Combination approach

Nightly batch for bulk expiry processing
Real-time check for transaction accuracy
Cache available balance for performance

Member Communication

Effective communication prevents negative experiences:

Pre-Expiry Warnings:

Warning Schedule:
- 90 days before expiry: Email reminder
- 30 days before expiry: Email + SMS reminder
- 7 days before expiry: Urgent email + push notification
- 1 day before expiry: Final warning

Warning Message Example:

Subject: Don't Lose Your Points! 2,000 points expiring soon

Hi Sarah,

You have 2,000 Loyalty Points expiring on December 31, 2024 (30 days from now).

Your points are worth $20 in rewards!

Redeem now:
- Shop online and use points at checkout
- Visit any store location
- Get a reward voucher for later use

Check your balance: [View My Account]

Post-Expiry Communication:

Subject: Points Expiry Notice

Hi Sarah,

As per our program terms, 1,200 Loyalty Points expired on December 31, 2024.

Current Active Balance: 8,300 points

Your next points (500 points) expire on March 31, 2025.

Continue earning and redeeming: [Shop Now]

Questions? Contact us: support@example.com

Exception Handling

Customer Service Expiry Reversals:

Allow CS to reverse expiry within grace period (30 days)
Require manager approval for reversals
Track reversal reasons for pattern analysis
Set caps on reversals per member (prevent abuse)

System Errors:

If expiry processed incorrectly, provide reversal mechanism
Audit trail of all expiry reversals
Automated alerts for unusual expiry volumes

Special Circumstances:

Account closure: Immediate expiry or grace period
Account fraud: Freeze expiry during investigation
System downtime: Extend expiry if members couldn’t redeem due to technical issues

Financial Accounting

Breakage Recognition

Points expiry creates breakage revenue that must be recognized properly:

Accounting Treatment:

When Points Issued:
Debit: Marketing Expense (or Points Expense)
Credit: Points Liability

When Points Redeemed:
Debit: Points Liability
Credit: Revenue (or Contra-Revenue) / Inventory

When Points Expire:
Debit: Points Liability
Credit: Breakage Revenue

Breakage Estimation:

Historical Analysis:
- Total points issued: 10,000,000
- Points redeemed: 6,500,000 (65%)
- Points expired: 2,800,000 (28%)
- Points active: 700,000 (7%)

Breakage Rate Estimate: 28-30% (depending on active points trajectory)

Use for Financial Modeling:
- Issue 1,000,000 new points
- Estimate 280,000 will expire (breakage revenue)
- Budget for 650,000 redemption cost
- 70,000 will remain in liability

Liability Reporting

Balance Sheet Presentation:

Current Liabilities:
  Points Liability - Expected to Redeem within 12 months: $85,000

Non-Current Liabilities:
  Points Liability - Expected to Redeem after 12 months: $45,000

Total Points Liability: $130,000

Expiry Schedule Report:

Points Expiry Schedule (as of Nov 18, 2025)

Expiring in:            Points        Value      % of Total
------------------------------------------------------------
0-3 months              500,000       $5,000     15%
3-6 months              800,000       $8,000     25%
6-12 months             1,200,000     $12,000    37%
12-24 months            600,000       $6,000     18%
24+ months              150,000       $1,500     5%
------------------------------------------------------------
Total Active            3,250,000     $32,500    100%

Strategy and Best Practices

Balancing Liability and Experience

Too Aggressive Expiry:

High breakage improves economics short-term
Customer dissatisfaction increases
Negative social media and reviews
Reduced program participation
Members become cynical about earning points

Too Generous Expiry:

Customer satisfaction high
Liability grows uncontrolled
Program becomes unsustainable
May need to reduce earning rates or benefits

Sweet Spot:

Expiry period feels fair (18-36 months common)
Clear communication prevents surprises
Warning system gives members chance to redeem
Activity extension rewards engaged members
Tier benefits for premium customers

Testing Expiry Policies

Before Launch:

Model financial impact of different expiry periods
Project liability growth under different breakage assumptions
Test communication effectiveness with focus groups
Review competitor programs for benchmark

After Launch:

Monitor actual breakage rates vs projections
Track customer service inquiries about expiry
Measure redemption behavior around expiry dates
Survey member satisfaction with expiry policy
A/B test warning communication timing and messaging

Adjusting Policy:

Communicate changes transparently and in advance
Grandfather existing points under old rules (goodwill)
Extend grace period during transition
Monitor impact on redemption and earning behavior

Member-Friendly Practices

Redemption Options Before Expiry:

Allow “save my points” conversion to vouchers (extends validity)
Offer donation option (charity redemption prevents waste)
Enable gifting to friend (viral acquisition + member satisfaction)

Transparency:

Show expiry dates in member portal prominently
Include next expiry date in all communications
Provide expiry history (show what expired and when)
Clear explanation of expiry policy in terms and conditions

Flexibility for Special Cases:

Military deployment: Freeze expiry during active service
Medical emergency: Extend expiry with documentation
Account takeover/fraud: Restore expired points
System downtime: Automatically extend if members couldn’t access redemption

Summary

Points expiry is a critical component of membership program management that balances financial sustainability with customer satisfaction:

Strategic Value:

Controls long-term liability and makes programs financially sustainable
Creates healthy urgency that drives engagement and redemption
Enables more generous earning rates through breakage economics
Provides mechanism to clean up inactive accounts

Implementation Keys:

Choose expiry rules that match program objectives and customer behavior
Implement lot-based tracking for accurate expiry management
Communicate expiry clearly and provide advance warnings
Design tier-based or currency-based variations for strategic flexibility
Monitor breakage rates and adjust policy as needed

Success Factors:

Expiry period feels fair to customers (18-36 months common)
Warning system gives adequate notice and redemption opportunity
Customer service can handle exceptions appropriately
Financial accounting properly recognizes breakage revenue
Policy balances liability management with customer satisfaction

Understanding points expiry configuration enables you to design programs that are both financially sustainable and customer-friendly. Next, explore the different Reward Types and redemption mechanisms available in BigLedger.