Miles as Money

New technologies enable FFP members to redeem their miles as easily as cash.

Even the most valuable loyalty currency isn’t the same as cold, hard cash. Airline miles and hotel points can enable you to take luxurious vacations at beautiful locations in faraway lands that you wouldn’t otherwise be able to afford, but they simply don’t have the flexibility of cash. You can earn miles or points for buying groceries but even if you are a multi-mileage millionaire, you can’t pay the cashier with your stash of airline miles.

Over the past few years, airlines have been slowly adding more non-flight award options for members to use their miles; from experiential awards, to auctions, to electronics and merchandise. While miles and points have become more and more flexible with these additional awards, they still aren’t as liquid as cash.

There are a few companies who have been steadily working on new technologies that will allow members to redeem their miles and points for virtually anything. The latest innovations tap into global payment systems, allowing members to redeem their miles and points anywhere they can use a credit card. It won’t be long before frequent flyers all over the world will have the choice to redeem their miles or points at checkout instead of cash.

The Search for Liquidity 

Being able to redeem miles as money isn’t new. United MileagePlus introduced its Choices program in 2006, which allows members to redeem miles for a statement credit when using their United co-branded card to purchase United flights, car rentals or hotel stays. Prior to that, Air New Zealand began allowing members to redeem miles like cash for flights in 2004 when they switched their loyalty currency from Airpoints to Airpoints Dollars. The first ventures into cash payments, however, were generally restricted to flights or travel-related redemptions.

Until now, redeeming points and miles for gift cards or PayPal credits have offered the most liquidity. For example, you’ll need to redeem an exorbitant 11,765 US Airways Dividend Miles for a $10 gift card with The exchange rate for American AAdvantage is more reasonable at 2,353 miles for a $10 gift card. users have been able to redeem their miles for PayPal credits on since 2011. After converting their loyalty currency, members can use the money to shop at any retailer that accepts PayPal, send the money to someone else or transfer it into your bank account. For example, American AAdvantage members and US Airways Dividend Miles members can exchange 2,412 miles for a $10 PayPal credit. By converting miles through PayPal, members can transfer their money into a bank account and essentially cash out their loyalty currency, but the PayPal option is only available with selected loyalty programs. And for most, the value they will receive for their miles is small compared to what they can get with flight redemptions. When redeeming a couple thousand miles for $10 in PayPal credit, each mile will be worth around $.004 per mile. Many members won’t consider redemptions where they get less than one and a half or two cents per mile and others have even higher thresholds, but each member values their miles differently.

If you are one of those members who do the math and won’t redeem your miles unless you get at least $.02 per mile, the new emerging technologies probably aren’t for you. The value you can get is generally much lower but these new options are still worth considering if you have orphan miles that will otherwise go unused. Or if you fly often for work and don’t want to redeem miles for even more time in the air, you can now spend the miles you earn from flying for almost anything.


One of the innovative programs that has been introduced in the past year is PointsPay by Loylogic. The program launched on Sept. 27, 2012 with Etihad Guest as its launch partner. The new payment option allows members to use their Etihad Guest miles to make purchases at over 30 million points-of-sale (POS) worldwide. Members can use PointsPay and pay with miles for online or in-store purchases from their mobile phone or by ordering a reloadable plastic credit card. PointsPay is currently available exclusively to Etihad Guest members but additional loyalty programs will be added to the PointsPay platform in the future. If you don’t have Etihad Guest miles but would like to use PointsPay, Starwood Preferred Guest is a transfer partner and SPG members can transfer points into Etihad Guest miles at a 1:1 ratio.

When the program launched, Randy Petersen said it was “groundbreaking; it solves what the loyalty industry has been looking for the past couple of years–an easy way for members to spend their points–and is quite member friendly. The challenge will be that age-old dialogue among members that want to pick and choose the value their points and miles have when redeemed for travel and have that exchange equally into the real world of POS. Not sure there’s enough value to satisfy all, but when it comes to flexibility of currency, maybe there will be something to the axiom that miles are just like money.”

How PointsPay Works 

PointsPay allows members to redeem miles for purchases in real time. Travelers with a mobile phone can download the mobile app and select the cash currency and miles they want to redeem. After you select the amount you want to convert, a virtual PointsPay Visa will appear on your mobile screen with the cash amount you have loaded onto the card, which can be used for payment. Converted miles that you don’t end up using within 24 hours will be returned to your mileage account. For example, if you load $50 onto your prepaid card and only spend $25 at checkout, the remaining unused $25 will automatically be converted back into your loyalty program currency at the same exchange rate and returned to your account.

Members can load a maximum of 2,400 euros per year. You can also request a plastic card and your miles will be loaded as cash to a Virtual PointsPay Visa or MasterCard that you can use for payment. Cash withdrawals or making payments to other credit cards are not allowed.

The PointsPay platform is compatible with iPhones and an HTML site is available that is compatible with all other smartphones. All phones that can access the Internet will be able to use PointsPay. You can also use PointsPay from a computer and request a plastic prepaid card and shop wherever you want.



The conversion rates for converting Etihad Guest miles to U.S. dollars is currently 1,479 miles for $10. Miles can be converted to other currencies as well. There is also a loading fee of 141 miles per transaction, regardless of how many miles you convert to cash and to order the PointsPay Plastic Visa card there is a one-time fee of 2,420 miles (includes shipping) for a card that will be valid for three years. When redeeming with PointsPay, each mile will have a set value of around $.007 per mile at current exchange rates.

The loyalty programs themselves will be determining the exchange rates and can change the cost per point at any time. They can also customize the value for different members and offer a different exchange rate for Gold vs. Silver members, for example. Dominic Hofer, Founder and CEO of Loylogic and PointsPay, says they encourage programs to offer a higher value to make the value proposition for the frequent traveler better. The programs will also be able to offer limited-time bonus offers. For example, if an airline normally offers $1 for 100 points, during the holidays they could offer Platinum members in the U.S. $1.25 per 100 points. Loylogic also works with merchants, who have the ability to offer promotions as well. Amazon or Expedia or Best Buy could offer a promotion where members who redeem PointsPay for their purchase would get a discount or miles returned to their account, such as, spend 20,000 miles and get 2,000 miles back at the end of the transaction.

Hofer says that many people would love to use their miles and points as cash. While many like to get a great deal and think first class flights provide the best value for their miles, others like liquidity. For airlines, Hofer explains, “the most important reward will always be the free flight and upgrade. Whatever you offer, even if you put cash into their hands.” For some frequent travelers with millions of miles who travel all the time, Hofer explains, “the last thing they want to do is fly more. They never see their families.” They may have so many miles that being able to spend them everywhere has value apart from the per point or mile value. It may be more valuable for that person to redeem points and buy a bike for their son. Hofer says, “as much as I agree that the points value should be looked at, I also think you should always consider, ‘what do I really need in life, what gives me the most pleasure?’ For some people it will be the flights, for other people, it’s something else.” Loyalty program members have different goals and Hofer says, “There is space for every strategy and every conviction. We support one piece of the member base and other solutions support other areas of the member base.”

Members of U.S. programs only have to pay attention to their accounts and earn or redeem every 18 to 24 months to keep their miles from expiring but many international programs, including Etihad Guest, put a date stamp on miles. Etihad Guest miles are only valid for two years for regular members, two and a half years for Silver and three years for Gold.

MAZ199, a business traveler and FlyerTalk member who participates in the Etihad Guest program along with other loyalty programs, recommends using PointsPay as another way to use miles that are about to expire. He says, “with most loyalty programs setting expiry dates on points/miles, it becomes hard to maximize award value before it expires–either because of limited award/upgradeable seats on flights, or limited partner options. Hence, my recommendation, to at least get a monetary value out of these ‘about to’ expire miles/points. I think it’s a great award option to have the freedom to convert it to cash (or virtual credit card). Sometimes, miles and points don’t cover a full free ticket (or upgrade). So, no more orphan miles/points with PointsPay.”


United MileagePlus members will soon have a similar digital wallet option when the program launches its PayPal program with Switchfly. The company announced in 2011 that MileagePlus members would have the ability to redeem miles to pay for products and services from merchants who accept PayPal. We contacted Switchfly to see when the program would launch for MileagePlus members and received this response from Kate Sullivan, “the official launch for the United MileagePlus/PayPal program is largely dependent on the complex development calendars for all parties, particularly United MileagePlus and PayPal. The integration is progressing, and we anticipate being able to share some positive news with you in early 2013.”

United MileagePlus will be the launch partner but we expect additional programs to partner with Switchfly to offer the ability to convert loyalty currency into cash that can be used as payment with PayPal. Members will be able to use miles only or a combination of miles and cash when making purchases with PayPal.

Since the program hasn’t officially launched, we don’t know what kind of value will be offered. Each program will establish the cash equivalent for each mile or point. PayPal is accepted by millions of online merchants and in-store at a growing number of retailers. Switchfly also expects to partner with other payment providers in the future.

Swift Exchange 

It’s been over a decade since Richard Postrel, Founder and CEO of Swift Exchange, came up with the idea behind Swift Exchange and their mobile payment platform, Swift Wallet. Postrel had been working with global reservations systems in the late 1990s and the foreign exchange business, where he built the world’s first dynamic foreign currency exchange system. He says it occurred to him that “loyalty was a primary driver and function of global commerce and that it’s importance and meaningfulness would grow with each passing succession of iteration.” He felt that the next logical step was to look at all of the different loyalty currencies and “provide them with the infrastructure and the capabilities to function as real currencies.”

Postrel says the response from loyalty programs about Swift Exchange has been extremely powerful in the last few months, but the initial response was one of skepticism. When he started filing the patents over a decade ago, Postrel expected people to say it was a great idea and help to make it happen. But he says at the beginning, “everybody had pretty much a ‘let’s wait and see’ attitude. It started off with ‘prove to me you can get the patents.’ And then ‘prove to me you can design the system.’ ‘Prove to me you can build the system.'” Now that it’s finished, however, programs want to join.

The Swift Wallet hasn’t launched yet and will complete its testing over the next several months. Some consumers will be invited to use the platform earlier than others and the company plans to introduce the product to the general public sometime in the second quarter of 2013. They are in discussions with around 70 major brands and expect the majority of them to be integrated within the first year.

 How Swift Wallet Works 

The Swift Wallet will allow consumers the ability to spend their points and miles as easily as cash. Members will be able to complete transactions by using their computer and shopping online or by using a smartphone at the point of sale. There will also be geocentric enhancements so users can see special offers where they are located.


Rob Jacobson, Chief Creative Officer, explains that the Swift Wallet is just one component to Swift Exchange. “There’s a control center on the backend that connects the merchant and the rewards provider, as well as promotional platforms, analytics and so forth. The Swift Wallet is just one piece of the solution and there’s a much larger infrastructure for merchants and loyalty programs to make it function and work effectively.”

Postrel says the average consumer belongs to 18 different programs. With the Swift Wallet, they are able to aggregate the currency in those accounts and combine them for purchases. For example, if you make a $400 purchase at Best Buy using your smartphone, you can choose to pay half with hotel program A and the other half with airline program B. Jacobson points out that the currencies will stay branded throughout the entire transaction, so the consumer is aware that, “thanks to hotel program A and airline program B, I just bought this product. The points are never transferred.” Postrel adds that brand identification is crucial and that “one of the problems that exists in coalition programs is you’re giving somebody else’s points away. You want to be identified with being an enabler for that transaction to occur. It doesn’t even have to be all of your points but you made it happen.”

Since points aren’t being transferred, consumers don’t see the point devaluation that generally happens when transferring points between programs (when allowed) or by using aggregator sites such as


The loyalty program will set the rate of their currencies and will be able to change the cost per point at any time. They will be able to set different rates according to many different factors, such as by relationship, offer, program, segment, geography and timeframe. Since the program hasn’t launched, we don’t know what the value will be.

Jacobson acknowledges that there are the mega-users of loyalty programs who want to squeeze every last penny out of their points by redeeming for a first class ticket to Asia. But members don’t share the same values. He asks, “What’s the value of 100,000 points if I can’t use them? If I don’t have the utility to use them for what I want, the value is zero. We think there are people who want what we call emotional value who say, I may not get the same cost per point that I would on an Asian airline ticket as I would to go to Vegas, but all my buddies are going to Vegas next weekend and it’s a trip that I want to make and this brand is going to allow me to do that. People will look at the value equation slightly differently.”

An Insider’s Point of View 

In a recent conversation during Aeroplan’s Media Day, we had the opportunity to talk with David Klein, Vice President, Marketing & Innovation at Aeroplan, and ask him how he views these new technologies. Klein said the concept of liquidity isn’t new and he finds the idea of being able to redeem miles as cash interesting, but has reservations about the value they offer and how they might potentially change the relationship between a loyalty program and its members. For one, members really value their miles. He says, “when you do research with consumers, whether they are Aeroplan members or not, they really do understand the value that these programs are delivering to them. A lot of them do the math and if they don’t do the math, they have some notion of what a mile is worth and what they are used to getting for their miles. And when the currencies of these programs are working through these technologies, the value of the redemption that the consumer receives is likely going to be less than what they would be receiving through other redemption terms.”

Some consumers may prefer the ease and convenience these programs bring, but frequent travelers who are engaged in the program are sold on the idea of free travel. He explains that the typical Aeroplan member is attracted to the program because of the value of the travel offer that Aeroplan brings and “isn’t going to be willing to give up a percentage of that value for the convenience factor.”

The other concern he has is that “you have to try to balance the transactional nature of your program versus the emotional. And if you turn the program strictly into a transaction-I earn a point by doing this and I can redeem the same point (if it’s a handheld device)-I’d be concerned that you’ve got somebody hooked on discounts. And you aren’t really developing an emotional connection with the program, which is what makes a program successful.”

Frequent flyer program members naturally have a very strong emotional connection to travel. Klein says he “would never want to give up an inch of that. I’m not saying it’s wrong, there certainly are applications for those solutions, but I don’t think it’s one size fits all.”


Liquidity isn’t exactly the Holy Grail of loyalty currency. But enabling members to spend their miles and points as cash has been something many people have been working on for a long time. We looked into three new options that solve some of the problems in the loyalty industry. Members aren’t always able to redeem for the travel they want and programs have huge liabilities on their accounting books–these options allow them to liquidate liabilities and engage their members with new ways to spend points.

While Hofer said that members would love to spend their miles and points as cash, we conducted a survey and only 23 percent of the 100 people who responded said it was important for them to be able to redeem their miles and points like cash and 31 percent said it wasn’t important. The remaining 46 percent said it was somewhat important. About half of respondents said they had redeemed their miles and points for awards other than flights and hotel stays and the vast majority, 79 percent, said they were currently satisfied with the types of awards offered by their frequent flyer programs. When asked what types of awards they would like to see added, a few respondents said cash and gift cards or experiential awards such as cooking lessons with a top chef but many travelers agree with the person who said, “None. I prefer to use my miles for air travel and my points for hotels stays.”

When asked if they could use their miles and points for anything, 41 percent said they would still redeem miles for flights and hotel stays. But the majority, 59 percent, said it depends on how much value they would get from their miles/points with other types of awards.

These technologies are new and it’s still too early to know exactly how members will respond. There are situations where it will make sense to redeem miles as cash, such as when miles are about to expire, you don’t want to travel or when you just want the convenience of being able to redeem your loyalty currency for something you want. Maybe as these platforms unfold we’ll see some high value deals so it’s worth keeping an eye on how they develop. The question is whether the value will be high enough to entice members to redeem for something other than a free trip.

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