ACE’s latest innovation -- Reserve Points -- are a new class of loyalty points that are freshly issued by the loyalty program and free of terms and conditions restricting redemption, application, type of use, and validity. Much like a reserve currency, they can be exchanged for any type of point within a loyalty issuer’s program (e.g., status, bonus or regular points) within the construct of its existing contracts.
For airlines and hotels, Reserve Points can play an important role in expanding access to liquidity by optimizing point pre-sale transactions. For banks, Reserve Points represent a more liquid and efficient asset, reducing both the risk and cost of undertaking a point pre-purchase transaction.
Point-Backed Instruments (PBI)
A Point-Backed Instrument (PBI) is a financial instrument backed by a portfolio of Reserve Points issued by operators of loyalty programs (such as a frequent flier program). PBIs represent a new asset class with an attractive risk-return profile incorporating exposure to the largest consumer-facing sectors of the economy.
For issuers of loyalty points, Point-Backed Instruments represent a new financial instrument monetizing the power of loyalty points either to raise capital for operations or investment activities. For investors, PBIs represent an opportunity to earn an attractive risk-adjusted return and diversify portfolios.