A sweeping review of customer loyalty schemes by the Australian Competition and Consumer Commission (ACCC) points out these programs are now “ubiquitous,” and offered by supermarkets, cinemas, banks, airlines, restaurants and other retailers.
It acknowledges that people can benefit from these programs, such as by getting discounts or access to exclusive deals. Membership of these schemes is also entirely voluntary.
However, it is worth remembering that loyalty schemes are fundamentally a marketing tool. The data you contribute when you use a loyalty card is used to target you with advertising, and some of it is so valuable the programs can also be serious money spinners for the issuers in their own right.
One of the ACCC’s biggest concerns is that businesses are amassing huge amounts of data in ways that is not well explained to consumers, and goes way beyond your name and other details you provide on the application form.
For instance, you might provide data unwittingly, such as through your online website browsing, social media accounts, or shopping habits.
In one example, the ACCC says Flybuys and Woolworths Rewards disclose in their policies that they may keep track of your spending in any of their stores – even if you don’t scan your loyalty card –because the schemes link your payment card to your profile.
ACCC chairman Rod Sims said many would be “shocked” to find out supermarkets were collecting data about them even if they didn’t present their loyalty card, and he wants Woolworths and Flybuys to cease this practice. Coles, which runs the Flybuys program, is reviewing its response, while Woolworths said it would carefully consider the ACCC’s recommendations.
And this is just one example of the watchdog’s bigger worry: that loyalty schemes are not giving people meaningful information about how they can control their personal data.
Flybuys and Woolworths’ policies state that spending behaviour could be tracked but the ACCC notes it is “unlikely” customers will read the fine print.
It is all part of a wider ACCC concern that people are not necessarily aware that this is what they are signing up for with loyalty schemes, because of an “information asymmetry.” That is economist jargon for the reality that the business knows far more about what you are agreeing to than you do.
In response, the ACCC is recommending changes, including that loyalty schemes review their privacy policies to make them clearer and more accessible, and specify to customers how their data is being shared.
It’s hard to think this will suddenly turn consumers into avid readers of privacy policies.
However, it may at least go part of the way to making customers more aware about the trade-offs involved in free loyalty schemes.
Clancy Yeates is a business reporter.