Loyalty glossary · 2. Accounting and finance (25)

Escheatment

Escheatment is the transfer of unclaimed value to the state under applicable unclaimed property rules when the holder or owner cannot claim it within the required process.

Escheatment transfers unclaimed value to the state. For a loyalty programme, the issue arises when points or rewards remain unused and applicable unclaimed property rules require the operator to report or remit the value.

The process is separate from an ordinary expiry decision. Expiry is a programme rule that can close a member's redemption opportunity. Escheatment is a legal treatment of the resulting unclaimed value, and the operator must determine whether the applicable rule permits release, requires notice or requires transfer.

A redemption forecast helps identify the balance that may remain unclaimed. It should distinguish expected redemption from points that have already been used and from points that have been cancelled under a valid programme rule. The forecast supports the accounting view, but it does not replace the legal analysis.

Cost of rewards affects the economic exposure. The programme needs a defined basis for the reward cost attached to outstanding points, while standalone selling price helps separate the value assigned to the loyalty obligation from the value of the underlying purchase.

Member communication is part of the operating control. Lifecycle marketing can explain an approaching expiry or provide a usable redemption path before the obligation reaches an unclaimed state. Personalization can make that message relevant to the member's balance and available rewards, but it cannot change the legal requirement.

The clean sequence is to forecast redemption, apply the programme rule, identify any unclaimed property obligation and record the resulting transfer. Treating escheatment as a hidden form of breakage creates an accounting and compliance error.

If 1,000 points remain unclaimed and the assigned value is 2 cents per point, the value under review is 20 dollars. If 300 points are later redeemed before the required process is complete, 6 dollars leaves the unclaimed balance and 14 dollars remains subject to review, so the point count and the value must move together.