How Do Loyalty Apps Work? A Simple Guide for Small Business Owners
Feb 10, 2026
If you've ever been handed a paper stamp card at a coffee shop, you already understand the basic idea behind a loyalty app. You reward customers for coming back. The difference is that instead of a card that gets lost in a jacket pocket, the whole thing lives on the customer's phone.
But "loyalty app" has become a catch-all term that covers a range of very different technologies — from standalone apps customers download from the App Store, to wallet-based cards that sit alongside their bank cards, to tablet systems that require hardware at the counter. Not all of them work the same way, and the differences matter a lot when you're a small business deciding which approach to take.
This guide breaks down how digital loyalty programs actually work, what the different types are, and what to look for if you're choosing one for your business.
The Basic Mechanics: How Any Digital Loyalty Program Works
Every digital loyalty program follows the same core loop, regardless of the technology behind it:
1. The customer joins. They sign up — either by downloading an app, scanning a QR code, tapping a link, or being enrolled by staff. Their details are stored digitally, and they're issued a loyalty card or account.
2. They earn rewards. Each time the customer makes a purchase or visits your business, they earn something — a stamp, points, cashback, or progress toward a reward. This is tracked automatically through the platform. The stamp model — where each visit earns one stamp toward a free item — is the most common structure for small businesses, and a digital stamp card makes it work without the lost-card problem that plagues paper versions.
3. They redeem rewards. Once the customer hits the required threshold (say, 8 stamps or 100 points), they can claim their reward — a free item, a discount, or whatever you've set up.
4. The cycle repeats. After redemption, the customer starts earning again. The programme creates a habit loop: visit, earn, redeem, repeat.
Behind the scenes, you — the business owner — have a dashboard or merchant console where you can see everything: how many members you have, how often they visit, which rewards are being redeemed, and how the programme is performing overall.
That's the simple version. Where it gets more interesting is in the specific technology each platform uses to deliver this experience.
The Three Types of Loyalty App Technology
Type 1: Standalone Apps (Customer Downloads Required)
This is the traditional model. The loyalty provider builds a mobile app, and customers download it from the Apple App Store or Google Play Store. The customer opens the app, finds your business, and uses it to collect and redeem rewards.
How it works in practice: The customer downloads the app, creates an account, and searches for your business within the app. When they make a purchase, they show their phone to staff, who scan a code or manually issue stamps or points.
The upside: Standalone apps can offer rich features — gamification, in-app messaging, and detailed customer profiles.
The downside for small businesses: Getting customers to download another app is a significant barrier. The average person uses about 9 apps daily and is reluctant to install new ones — especially for a single business they visit once a week. Download friction is the number one reason small business loyalty programmes fail to gain traction.
There's also a visibility problem. Once the app is installed, it competes with dozens of others on the customer's phone. If they don't use it regularly, it gets buried or deleted.
Type 2: Wallet-Based Cards (No App Download)
This is the newer model, and it's increasingly the one small businesses are choosing. Instead of a standalone app, the loyalty card saves directly to the customer's Apple Wallet or Google Wallet — the same place they keep their bank cards, boarding passes, and event tickets. If you're unfamiliar with the concept, a wallet-based loyalty card is essentially a digital pass that lives in the same app as your bank cards and boarding passes — no separate download, no separate login.
How it works in practice: The customer scans a QR code or taps a link. A digital loyalty card is created and saved straight to their phone wallet. No app to download, no account to create, no password to remember. When they visit your business, staff scan the card from their wallet screen using a scanner app, and stamps or points are issued automatically. That QR code is doing the heavy lifting — it's the entire onboarding mechanism, and QR code loyalty programs have become the default for small businesses precisely because they compress sign-up into a single scan.
The upside: The sign-up process takes under 30 seconds and the card sits alongside the customer's bank cards — which means it's visible every time they open their wallet to pay. There's no app to forget about, no app to delete, and no app that drains their storage or battery.
The downside: Wallet-based cards are typically simpler than full standalone apps. They don't usually support in-app games or complex interfaces. But for most small businesses, that simplicity is actually the point.
This is the model Perkstar uses. Customers get a digital loyalty card in their Apple Wallet or Google Wallet, and you manage everything from your Perkstar dashboard — issuing stamps, sending push notifications, tracking activity, and running your rewards programme without any additional hardware beyond a phone.
Type 3: Tablet or Terminal-Based Systems
Some loyalty platforms work by placing a tablet or dedicated terminal at your counter. Customers enter their phone number, scan a card, or tap their phone on the device to check in and earn rewards.
How it works in practice: You install a tablet at your point of sale. Customers interact with it directly — typing in their number or scanning a code — and the system logs their visit.
The upside: It can feel integrated into the checkout process and doesn't rely on the customer having already signed up on their phone.
The downside: Hardware adds cost and counter clutter. Tablets break, need charging, and require maintenance. They also create a bottleneck during busy periods — the last thing you need at peak time is a queue forming at the loyalty tablet.
For most small businesses, the wallet-based approach offers the best balance of simplicity, cost, and customer experience.
What Happens on Your Side: The Business Dashboard
The customer-facing side of a loyalty app is only half the picture. The other half — and arguably the more valuable half — is what you see as the business owner.
A good loyalty platform gives you a dashboard where you can:
See your members and their activity. How many active members you have, how often they visit, when they last came in, and how close they are to their next reward. This isn't just interesting data — it's actionable intelligence. If a regular customer hasn't visited in three weeks, you can see that and do something about it.
Send communications directly to customers. Push notifications, email, and SMS let you reach your loyalty members without paying for advertising. A push notification saying "Double stamps today" costs you nothing to send and can shift footfall on a quiet day.
Automate key moments. Birthday rewards, lapsed-customer reminders, post-visit thank-you messages — these can all be configured once and then run automatically. You set the rules, the platform does the work.
Track programme performance. Redemption rates, stamp accrual, sign-up trends, and visit frequency all tell you whether your programme is working and where it needs adjustment.
With Perkstar specifically, the dashboard also includes customer segmentation (so you can target specific groups with tailored messages), Google Review Rewards (prompting happy customers to leave reviews), referral programme management, and analytics that show you exactly what's driving repeat visits.
Modern Take: Why "No App Download" Is Now the Standard for Small Businesses
Five years ago, having your own branded loyalty app felt like a competitive advantage. Today, it's more often a barrier.
The app landscape has changed dramatically. Customers are more protective of their phone storage, more resistant to push notification permissions from unfamiliar apps, and more fatigued by the sheer number of apps asking for their attention. For a large chain with millions of customers — Starbucks, Costa, Nando's — a standalone app makes sense because the brand has enough gravity to justify the download. For a local café, salon, barber, or restaurant, it usually doesn't.
This is why the wallet-based model has become the default for small business loyalty programmes. It removes the single biggest point of friction (the download) while keeping all the functionality that actually matters — digital stamps or points, push notifications, customer data, and automated rewards.
The practical impact is real. Businesses that switch from a download-required app to a wallet-based card typically see sign-up rates increase significantly, simply because the barrier to entry drops from "install an app and create an account" to "scan this code." For a detailed breakdown of how to run a loyalty program without an app — including setup, customer experience, and what you lose versus what you gain — the shift away from downloads is well documented.
And because wallet cards sit alongside bank cards, they benefit from passive visibility. Every time a customer opens their wallet to tap their card at a payment terminal, they see your loyalty card too. That's a subtle but powerful daily reminder that they're earning rewards with you.
What to Look For When Choosing a Loyalty App for Your Business
If you're evaluating loyalty platforms, here are the things that actually matter for a small business:
Sign-up friction. How many steps does it take for a customer to join? Every extra step costs you members. The best platforms get a customer enrolled in under 30 seconds with no app download required.
Card types and flexibility. Not every business needs the same reward structure. Stamp cards work well for visit-based businesses (cafés, barbers, salons). Points cards suit spend-based models (restaurants, retail). Some businesses benefit from membership cards, discount cards, or multipass options. Look for a platform that offers the card type that matches your business model.
Push notifications. This is your direct line to customers. Make sure they're included in your plan and ideally unlimited — you shouldn't have to pay per message or ration your communications to stay within a cap.
Pricing that makes sense at your scale. Enterprise loyalty platforms can cost hundreds or thousands per month. For a small business, you need something that starts affordable and scales with you. Watch out for per-member fees — these punish you for growing your programme.
Customer support. When something goes wrong or you need help setting up, can you actually reach someone? Phone, email, WhatsApp, and live chat all beat a generic help desk ticket system.
No long-term contract. You should be able to try the platform and leave if it doesn't work. A free trial with no credit card required is the clearest signal that the provider is confident in their product. If you're comparing platforms side by side, a breakdown of the best digital loyalty card software for small businesses can help you shortlist options based on these exact criteria.
Perkstar ticks all of these: wallet-based cards with no app download, eight different card types, unlimited push notifications, plans from £15 per month with no per-member fees, personal account manager support via WhatsApp, phone, and email, and a 14-day free trial with no credit card needed.
Real-World Example: How a Loyalty App Works Day-to-Day
To make this concrete, here's what a typical day looks like for a small business using a digital loyalty programme:
9:00 AM — You open up and your first regular walks in. They pull up their loyalty card from their phone wallet, your staff scans it with the Perkstar scanner app, and a stamp is added. Takes three seconds.
11:30 AM — A new customer pays for their order. Your staff member says, "Would you like to join our rewards programme? Scan that QR code and you'll earn a stamp today." The customer scans, fills in their name and email, and the card saves to their wallet. Thirty seconds, new member.
1:00 PM — It's a quiet afternoon. You open Perkstar on your phone and send a push notification to all members: "Feeling peckish? Pop in before 4pm for a bonus stamp today." The notification lands on every member's lock screen within minutes.
3:45 PM — Two customers come in specifically because of the notification. One of them hits their eighth stamp and redeems their reward — 20% off today's order. They're happy. They'll be back. If you run a café specifically, this pattern — scan, stamp, notify, redeem — is exactly how digital loyalty cards for coffee shops are replacing the paper stamp cards that used to sit next to the till.
6:00 PM — You glance at your dashboard before closing. Five new sign-ups today, 23 stamps issued, one reward redeemed. Your active member rate is up 4% on last week.
That's it. No complicated processes, no hardware beyond the phones you already have, no admin that takes you away from running your business.
Getting Started
If you're considering a digital loyalty programme for your business, the fastest way to understand how it works is to try one.
Perkstar offers a free 14-day trial with no credit card required. You can set up your loyalty card, customise the design, and start signing up customers within 15 minutes. Plans start from £15 per month with unlimited members and push notifications included.
