Loyalty programs (LPs) are widely prevalent in practice and typically analyzed in economic research for their role in boosting business. This paper uncovers a novel finance role of LPs. We document stylized facts about LPs in travel industries, which lend support to this role. We build a dynamic model of LP financing, which features convenient rewards that give consumers flexibility in redeeming rewards.

Convenience renders the raised funds endogenous and dependent on firms' issuance policies and business characteristics. Based on this feature, the model addresses what types of firms should use this financing and how they should issue rewards.