Bakkt, the bitcoin futures exchange that launched last year, wants to integrate reward points, game tokens, and cryptocurrency into a mobile wallet that will allow consumers to spend them as dollars.
Intercontinental Exchange, or ICE, the parent company of the New York Stock Exchange, announced on Wednesday it has agreed to acquire loyalty program provider Bridge2 Solutions, whose ownership it will later transfer to its majority-owned subsidiary Bakkt.
To fund the purchase of the Atlanta company, Bakkt will use proceeds from its Series B round of funding, which is expected to close later this quarter. Terms of the deal were not disclosed.
Bridge2 Solutions operates loyalty redemption sites, handling some $60 billion in rewards points for America’s biggest loyalty program sponsors, according to Fortune. That includes seven of the top 10 financial institutions. Along with airlines and hotel companies, credit card providers are the largest issuers of loyalty points. Including other merchants and corporate employee incentive rewards, Bridge2 runs 4,500 such programs.
Americans go to these sites to check how many points they have and cash them in for other items, like a TV or an Apple watch. Reward points add up quick, and most Americans don’t even know how many they have.
After launching its regulated bitcoin futures and options exchange in September, Bakkt’s next move was to create a digital payments app where consumers could manage and spend all of their digital assets, including cryptocurrency, loyalty points, and even in-game tokens. Bakkt announced those plans in a blog post in October.
To finalize that dream, Bakkt needs sponsors and a payment app that enables consumers to spend those assets at points of sale. It hopes Loyalty Pay, a pilot program that Bridge2 is currently testing, will be the answer. The solution includes a digital wallet that would be accepted anywhere Apple Pay or Google Pay is accepted.
Ultimately, though, Bakkt hopes to get merchants to accept payments directly from its own app. But that will require a huge marketing effort to convince retailers to alter their payments process to link directly to the Bakkt app. The returns could be worth it though, because it would allow them to skirt the typical 2.5% interchange fee that goes to banks, credit card companies, and other intermediaries.
Jeff Sprecher, ICE’s founder and CEO, believes the legacy payments infrastructure is ripe for intermediation. He told Fortune: “The Internet should make it possible to create a direct payment system that doesn’t use a third-party set of rails. It hit us that making rewards cash-like would be a step in that direction.”
Major loyalty program sponsors in the U.S. alone are sitting on $160 billion in reward points, Fortune said. Spechter is betting that if the economy takes a downward turn, consumers could start cashing in heavily on those points, which currently turn over at a slothlike pace of 30% a year.
“Combining Bridge2 Solutions’ embedded relationships with banks and merchants and their innovative Loyalty Pay solution will enable us to launch new products that further drive loyalty and empower consumers to trade, transfer and spend digital assets in entirely new ways.” Mike Blandina, CEO of Bakkt, said in a statement.
Bakkt anticipates launching a version of its app in the first half of 2020. According to the Fortune report, it doesn’t yet have a timetable for when it will incorporate the features that the Bridge2 Loyalty app brings to play.
According to a recent post in the Wall Street Journal, ICE has also made a takeover offer for eBay in a deal that may value the e-commerce giant at more than $30 billion dollars.