What Price Are You Really Paying To Get Your 5th Coffee Free?

Loyalty cards and programs often offer feel-good assurances like “we care about your privacy” but a growing body of evidence shows that when a business gives a reward with one hand, it takes far more with the other.

Roughly nine in 10 adults are members of loyalty schemes, and most are signed up to around five programs -- ranging from your local car wash to an airline frequent flyer program.

"We've seen a change, it used to be something that only the big players would offer ... in the last five years almost every store in a retail sense that you walk into they will say to you 'if you sign up right now I will give you five percent off the product you are buying'," Digital Rights Watch Chair Tim Singleton Norton told 10 daily.

Roughly nine in 10 adults are members of loyalty schemes. IMAGE: Getty Images

Offering these quick incentives before consumers have the time or information to consider what the trade means is at the heart of the consumer watchdog's latest report.

This week, the Australian Competition and Consumer Commission (ACCC) released its draft report, detailing how customers had limited control over how their personal information is being used.

“The privacy policies of these schemes are frequently very vague and don’t tell consumers who their data is being shared with or how it is being used, shared or monetised,” ACCC chairman Rod Sims said on Thursday

How It Works

The five most popular loyalty programs include Qantas Frequent Flyer, Woolworths Rewards, Velocity Frequent Flyer, FlyBuys and Priceline sisters club, but the same principles apply to much smaller rewards programs at local businesses.

IMAGE: Facebook

When a consumer signs up for this program, their personal data as well as other shopping and even movement patterns are often captured and tracked.

Sims says such schemes are building up ‘detailed profiles’ of consumers and, in some cases, selling that information to third parties who then target you with advertising based on what they know about you.

“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 Fine Print

A 2018 national report on consumer attitudes to privacy policies released by the Consumer Policy Research Centre found that 94 percent of Australians do not read all privacy policies that apply to them.

It also found that people either don't have enough time to read it, don't understand it, don't know how to negotiate for better terms or can't avoid the service altogether.

But Norton thinks it gets even worse.

"It's not even easy to access these [privacy policy] sorts of things. Think about a retail transaction, they say 'give me  your email and I will plug it into the system' and you get a card and you're done," he said.

Norton says consumers need to stop for a moment and ask what sharing their email is worth in real terms.

"That email is worth to that company far more than five or 10 percent off a T shirt," he said.

The Fallout

With data aggregators, data brokers and data analysts keen to get their hands on consumer profiles, there are several scenarios privacy experts are concerned about. But what if consumers don't care that advertisers know where and how they show.

IMAGE: Getty Images

"So what, you might ask. If you’ve nothing to hide, you’ve nothing to lose, right? Not so. The more our personal information is collected, stored and disclosed to new parties, the more our risk of harm increases," Dr Katharine Kemp Senior Lecturer, Faculty of Law, UNSW warned.  

READ MORE: Qantas Has Just Announced Massive Changes To Its Frequent Flyer Program

READ MORE: Google Under Investigation For Using Customer Data To Track Their Movements

Kemp says potential harms include fraud and identity theft which affects one in 10 Australians.

Insurance and banking companies may also charge higher insurance premiums or interest rates based on what they learn about your online behaviour.

What You Can Do

Norton says if you want to protect your health, financial status, relationships, political views, and even sexual activity, consumers need to ask questions of themselves and the business.

Very often privacy policies lead with feel-good assurances “we care about your privacy”, but it is up to customers to some homework, including math.

IMAGE: Getty Images

"If you think about frequent flyer points, you may appreciate that getting a free flight once a year is worth sharing your info over, but a few dollars off a T-shirt in a store you may never return to-- that's not going to be worth it," he said.

READ MORE: Statements From The "Winners" Of 2018's CHOICE Shonky Awards

What Authorities Can Do

The ACCC's draft report has called on businesses offering loyalty schemes to ensure they are not misleading customers and its final report is due later this year.

While Norton agrees with the watchdog that the onus is now on businesses who run these loyalty schemes to be more upfront and honest about their commitment to the privacy, he also thinks authorities need to come down harder.

"What are they [ACCC] going to have as penalties or retribution if companies do the wrong thing?

What does reform look like? This is not something we can just put on consumers to figure out we need legislators to pick this up," he said.

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