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A View On Cashback And Rewards Programs

If you follow me for many years, you probably have noticed that I have a penchant to openly discuss various rewards and cashback programs. I have previously been told that this feels off-character for someone who also generally writes about security and software development, as the common view is that these programs are a privacy invasion — but as I already explained I don’t see it that way and I indeed tend to identify and otherwise leverage these programs when I have a chance.

The reason why I’m fascinated by these programs and why I spend possibly unreasonable amount of time planning expenses to combine them (and clearly unreasonable amount of time writing about it even when my main audience is clearly totally uninterested about them!) is likely to be found in a partly cultural and partly familial source, of the same type that Alec from Technology Connections refer to as a trait of Midwesterns.

As I said in a previous post, I grew up in a family that was relatively tight on money, as my father was a blue collar worker and we were a family of five (for most of my childhood, before my sisters moved out) on a single income. The only reason why it wasn’t more of a struggle was my father having an accident at work when I was little, and being paid an additional disability allowance.

This means that even when it comes to be a 1% or 2% discount, it tends to be something I would care about, particularly if the alternative is to just leave it on the table. So loyalty cards, coupons, and all kind of things like that are the type of programs I would look at and pay attention since I was a kid — among other things because the first set of mugs and plates I remember using as a child were prizes from points collections on Barilla pasta, talk about loyalty! Indeed, my very first optical mouse was a prize from Coca-Cola (not the first, and not the latest!), back when optical mice would still set you off close to €100 and I wouldn’t have been able to afford it.

Collecting points from boxes of the same brand is a lot less common nowadays. On the other hand, basically any shop you buy stuff from tends to give you points for loyalty. I already wrote on the subject, so I’m not going to discuss shops’ loyalty programs here, and I rather want to talk a bit more about the rewards and cashback programs that come from outside shops, and are rather usually coming from financial institutions.

So let’s first talk about the elephant in the room again. I despise the whole “you are the product” discussion when it comes to privacy, data, and marketing in general, but it would be disingenuous of me not to point out that indeed most rewards programs, as well as most cashback offers and loyalty systems are a form of analytics. These are done with a clear purpose that is definitely not giving you some free money: it’s either figuring out the behaviour of their customers, inviting more customers for a service that has recently launched, or convincing them to switch their loyalty from a competitor.

Different programs have different impact on their users privacy, and there’s clearly space to debate on what is and is not excessive. I’ll get into more details as I talk about specific example of programs, but the loyalty program at your local coffee shop that is handled via a 10-stamps card, and the “free” cashback service that require you to install a Chrome extension with permission to rewrite your navigation URLs and Google search pages — these are two different problems to solve.

The spark for this post was Santander moving from their previous Retailers Offers program to a new program called Santander Boosts — which significantly changed their rules and, at least partially, the usefulness of the program. But before I dig into that let me explain what was there before — it’s not pointless because there’s a number of other institutions offering basically the same program: NatWest, American Express, Lloyds Bank are among those that I know have (or at least had) similar programs in place.

For this type of offers, each institution applies it only to their own payment cards only, and they usually apply to both in-store and online purchases. You are required to activate the offers you’re interested in, which usually just involve clicking through and accepting the terms of the offer. Most programs would say that these offers are “tailored for you”, but in my experience they are basically the same across accounts with different usage patterns and different source institutions, suggesting that they are rather coming from some intermediary agency. Offers change considerably, varying from recovering a percentage point or two, to the equivalent of half price on your spend. For subscription services these usually turn out in the form of a number of months off if subscribed for a year or more. To give an idea, one of the offers we used most recently was on American Express, £100 off a £250 or higher bill at a Marriott hotel (it’s a Marriott-branded card, but not sure if that makes a difference — Santander, NatWest, and others have also had almost identical offers for IHG hotels.)

The good thing of these offers is that you only need to activate, and remember to use the right card for them to apply. If you have an American Express Shop Small week, you want to make sure the payments go through your Amex. If you have 10% off on your bill at Honest Burgers on NatWest, you want to make sure to pay with NatWest. But otherwise, the card issuer takes care of it without you having to do anything else. How the cashback or reward gets back to you vary depending on the source: American Express usually shows the offer as a credit to your statement a week to a few days later, NatWest Rewards credits a separate “Rewards account” that you can redeem against in either cash or (further discounted) gift cards, while Santander used to tally up all your used offers at the end of the month in either cash or credit on your credit card statement.

How this works might appear fairly straightforward: the issuer of the card knows where you’re spending so they can attach the offer to the particular merchant code, right? Well, yes. But then you have other programs that are similar, but not attached to the institutions at all — such as the already discussed Airtime Rewards. In this case, it appears that when you input your card details on their app, they are allowed to trace some of your spend. And they can even know if it comes out of a connected virtual PAN as used by Google Pay! Well, sometimes, at least. This is not new, or specific to Airtime Rewards — the Rewards Club in the US has similar capabilities, so that you can get IHG points when dining at “partner restaurants.” I used that a few times because some of the restaurants I used to frequent in downtown Mountain View were part of the program — and got surprised once after a social dinner in Manhattan to find myself credited more points!

While Airtime Rewards appears “sneaky” for those who are not involved daily in payment rails, Nectar Connect appears both easier to understand and also a bit scary about its reach. For those who are not in the UK, Nectar is the loyalty program used by Sainsbury’s supermarkets — it uses the same name, logo, and some of the styling of the loyalty program that Auchan used to use in Italy many years ago, including the idea of covering more than just the loyalty at the store, but as far as I know it is unrelated.

Nectar is an interesting program, because it provides effectively three different “rewards streams”. The first is very obvious because it is a straight through store loyalty system: you scan your Nectar card (or use the self-scan option in store), and you get points. In addition to covering Sainsbury’s, the Nectar program gives you points at Argos (obviously, they are the same company) and less obviously on eBay by providing the Nectar number in your account. The second stream I’ll get into details later, but is called “partner offers” and covers a number of unrelated brands exclusively online. The final stream is the Nectar Connect, which has a different website, providing a different set of offers that need to be activated and tied to your payment cards, and that can be redeemed in store as well as online.

How does Nectar Connect know your card, and when you spent money at the retailers the offers you activated were for? They use the OpenBanking APIs, and require you to allow them to access your bank accounts (thus the “Connect” part of the brand.) This means that theoretically, they’re able to see every transaction you make, not just those that involve the retailers you have activated offers for. Whether this is more or less concerning than the offers provided directly by the issuers I don’t know, because I honestly expect that all of these type of programs are operated by the same group of intermediaries.

To be clear once again, all of these offers are not coming from goodwill of their relative issuers. The retailers that are providing the offers are usually giving you a discount, although usually with a complex structure of paying the intermediary to “sell” these offers on. As I have not worked in that field myself, I don’t even know what the structure looks like and what the final cost to the merchant is, but I can assume that if they still keep signing up for it, they are getting more profits than it costs them. In either case, unless I’m signing up for a service, the sustainability of the business is not entirely my concern — I was sad that my local Carluccio’s had to close, but it wasn’t the end of the world.

So, what about the new Santander Boosts offers? Well, it is actually very similar to Nectar’s Partner Offers, and a number of other similar programs. They generally apply online only, and require you to click-through from the “offers website” to the “merchant website”, generally with cookies enabled and no ad blocker, since quite a few of them – particularly uBlock Origin – will block referral links for affiliate marketing. And this mostly gives away an important part of how these programs source their offers, and it is not new — indeed, I wrote about a similar idea back in 2012, ten yeas ago!

A wide number of online retailers run affiliate programs — that is they allow people and other companies to sign up to earn a referral fee every time someone buys at the retailer while coming from a particular website. The original intention behind this was to allow websites specialized in reviewing hardware, books, or similar services to earn a commission when suggesting their readers to a particular retailer over another. Amazon has a particularly well oiled one, and indeed I use Amazon affiliate links on this blog if I’m linking to a specific piece of hardware or book — it never ever really covered even the cost of a single VPS for the blog, but it’s better than nothing. I’ll get into some details of that in the future, I promise.

What happens then is that a number of intermediary companies (because I’m sure Santander Boosts is not operated by Santander directly, as it has the look-and-feel of a white label service) sign up as affiliate for as many retailers as they can, and then offer to share (some of) their affiliate fees with the buyer. This is what Socialvest did in 2012 — just instead of giving you the cashback directly, they would allow you to donate it, or to load it into Flattr.

In the case of Nectar, they appear to have a more curated list of offers, while Santander Boosts appear to have a huge list of items, including AliExpress (!) and quite a few discount online services. But they are not alone. Revolut, which I have already ranted about, has a similar curated list of offers with the same requirement of clicking through the retailer store directly from the app to be able to receive the cashback. And these appear even outside of the remit of financial institutions — the rental agency marketing service I complained about does basically the same for their customers.

There is another feature that SocialVest had ten years ago that is still present today: the browser extensions. While the financial institutions don’t appear to have this as an option anywhere, other rewards programs exists that still entice you to install their extensions that overwrites URLs to include their affiliate code — although those don’t work for Amazon, since their affiliate programs terms and conditions explicitly disallow that for many years now, after a number of browser extensions were found to do exactly that without informing the user! You can, if you so wanted, sign up for Microsoft Rewards as Microsoft suggests you nearly every time you open Edge. Or you could sign up for the equivalent program by Rakuten, which currently invites you to install their “toolbar extension” very visibly at the top of the page — do you all remember the amount of toolbars people ended up with on Internet Explorer 5 and 6?

To be fair to Rakuten, they are probably the only one that make it very visible on their home page that the money does not appear out of nowhere:

How cashback works
Every time you shop through Rakuten, the brands give us a commission that we share with you. This is the cashback you receive!

They also have probably the most detailed instructions page on how technically these rewards program work. Combining these two with the reputation that Rakuten has, and despite my past with Kobo, I might actually give this a try — by dedicating a browser only to use with Rakuten, since I’m not going to run their extension across everything I browse, that does make me too uncomfortable.

Of course up to now I have focused basically only on UK-based services — that’s because it’s all I know about right now, particularly since I have not been spending any significant time in the States for a few years. I’m sure that if you look around in whichever country you live, you’ll find an equivalent service, though their reputation is likely going to change significantly country by country (not least because of privacy regulations.)

Personally, I don’t see much of a point to leave these cashback offers on the table, if I can do so without having to open myself to significant risks — thus why I don’t find myself using uBlock Origin, but rather ABP that still allows these offers go through. And why I might sometimes change loyalty on my purchases depending on whether the retailer I’m buying from has or has not offers running at that point.

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