Many retailers are moving away from physical loyalty cards but because a number sequence does not flow from D365 to the POS, Retailers using Dynamics will NOT be able to operate successfully with or without physical loyalty cards at the store. 

With Physical Loyalty Cards

The OOB Loyalty program in Dynamics 365 does not allow a number sequence to flow from D365 to the POS. What this means is that OOB you have to scan in or key in a loyalty card number from a physical card. Any number can be entered and no number sequence allocation is respected. If you normally have a 10 digit loyalty card number and you key in 9 or11 digits the system will not stop you. The card this happens to becomes useless because the printed number will not match the system number. This physical card could never be used to link up with a customer. 

Without Physical Loyalty Cards

When no physical loyalty cards are used by the buisness the card number still needs to be filled in at the POS. This means that a cashier could key in any unique number  which is not something you would expect a cashier to do. If a number sequence could flow to the POS, you could configure the sequence to auto-generate a card number such that a cashier does not have to manually guess at what it should be.