People believe loyalty schemes are rewarding them with points and discounts, but the consumer watchdog warns the programs are increasingly selling detailed customer profiles to other businesses.
The Australian Competition and Consumer Commission has questioned whether people are getting a raw deal from hugely-popular frequent flyer, supermarket, credit card and other loyalty schemes.
The schemes are increasingly generating revenue from the rich data they collect about their customers’ habits, interests and preferences, an ACCC report released on Thursday said.
ACCC chair Rod Sims said the schemes’ privacy policies are frequently very vague and do not tell consumers who their data is being shared with and how it is being used, shared or monetised.
“Most people think they are being rewarded for their loyalty with discounts or points, but in reality some schemes are building up detailed profiles about consumers and selling those insights to other businesses,” Sims said.
“Selling insights and access to loyalty scheme members are becoming increasing sources of revenue.”
The ACCC said Australia’s major loyalty schemes do not sell their members’ personally-identifiable consumer data.
But it said they do share or exchange de-identified, tokenised or hashed data – using a unique identifier instead of a name or email address – about their members with third parties.
Consumers have limited control over the collection, use and disclosure of their data, the ACCC said.
“Consumers may also be shocked to find that some schemes collect their data even when they don’t scan their loyalty cards, or that they combine it with data from other sources that they might not even be aware of,” Sims said.
The ACCC wants programs such as Woolworths Rewards and Flybuys to stop automatically linking customers’ payment cards to their profile to track transactions even when they do not scan their loyalty card.
The ACCC has wider concerns about loyalty schemes, amid consumer complaints that they have not earned, kept or been able to redeem their points in the way they expected.
The issues include unilateral reductions in the rates at which points are earned or their value and unfair expiry periods, sometimes involving significant point balances accumulated over decades.
Many consumers were not aware of expiry periods and did not believe it was reasonable for operators to “steal” what they regard as their property, the report said.
Frequent flyer members also complained about high “carrier charges” when points are redeemed for flights.
“Many people think they can redeem their points for a free flight, but in some cases, the cost of purchasing an airfare without using points may be similar to the cost of a flight using points once the airline adds on taxes and charges,” Sims said.
Nine-in-10 adults are members of a loyalty scheme, with the average Australian having between four and six loyalty cards.
Qantas Frequent Flyer is Australia’s largest loyalty scheme with 12.3 million members, followed by Woolworths Rewards, Velocity Frequent Flyer and Flybuys.
The ACCC said the major frequent flyer schemes generated more than $7.2 billion for their operators from 2014/15 to 2017/18.