Great news! Quebec drops the mile/point value retention from proposed bill

Last week we detailed the news of Quebec's proposed Bill 791 which would make points expiry and points devaluation illegal. Good news is that on May 2nd, the Quebec government seems to have forgone with Bill 791 and are moving ahead with Bill 134 which no longer stipulates the points devaluation.

Overall this is great news as had Bill 791 actually been passed, loyalty programs would have found ways around the retention of mile and point value. Namely by not participating in Quebec like mbna chose with their Alaska Airlines credit card or by adjusting the earn rates on miles and points.

It does appear however that the mbna Alaska Airlines credit card is still available in Quebec at this time despite mbna telling us otherwise as when you go to the application page there is no stipulation that it is not. I'm going to reach out to mbna once again to see if I can get further clarification on what they told me last week.

As to expiry, Quebec will match Ontario with the law if and when the bill passes. Seeing that most programs removed their expiry rules after the Ontario bill passing the Quebec bill is more of a protectionist move for possible future changes to programs. It is possible other provinces may follow suit but with our two most populous provinces having the rule it is very unlikely loyalty programs will ever put in place expiry rules for the provinces and territories outside of Ontario and Quebec.

Thanks to our twitter follower @YulflyMontreal for letting us know about the new Bill 134!

What is going to happen to loyalty rewards in Canada if Quebec passes Bill 791 and programs have to retain point/mile value?

The coming weeks could see drastic changes in the loyalty landscape in Canada. Earlier this year new legislation was proposed in Quebec that followed in the foot steps of Ontario. The Ontario legislation covered the expiry of loyalty points and was passed so that points and miles earned from programs would not expire based on time but could due to inactivity. Quebec is now wanting to do the same but are going a step further, they want to make it illegal for programs to change redemption rates (ie mile/point value) from what you get when you sign up.

Excerpt from Bill 791:

REWARDS PROGRAM CONTRACTS
“187.6. Before entering into a rewards program contract, the merchant must inform the consumer of the conditions applicable to obtaining and using rewards points.
“187.7. Subject to any applicable regulations, any stipulation of or amendment to the contract providing for an expiry date on the rewards points obtained by the consumer is prohibited.
“187.8. Any stipulation providing that the merchant may retroactively change the value of the rewards points accumulated by the consumer is prohibited.”

Line 187.7 is essentially the same as Ontario's bill however line 187.8 goes that step further. It does not allow programs to change the value of reward points accumulated. This means programs cannot change redemption rates as that effectively changes the value of the rewards points accumulated. We saw last year the conclusion of a class action lawsuit against TD in Quebec when they changed their reward redemption rates in the TD Travel Reward program. TD settled and let Quebecois keep the old better redemption rates until August 31, 2017 whereas the rest of Canada had to book at higher rates. Then there was the whole AIR MILES debacle in 2016 and the risk of rates going higher with them since they aren't expiring miles and you can see why Quebec has added this line into the legislation.

This is why the mbna Alaska Airlines MasterCard will no longer be available in Quebec as we know that Alaska Airlines will want to change redemption rates in the future. But what does this hold for existing members of Mileage Plan and all other programs? What is Aeroplan going to do? Quebec is huge for them - they could get rid of Classic Flight rewards and go strictly market fare but that would kill their membership base in the province. Then there is AIR MILES, Shoppers Optimum and scores of other programs. How are programs going to deal with not being able to change the value of the points and miles earned by their consumers in Quebec? This is huge. It looks great for the consumer in the way that you won't have to worry about your points devaluing through redemption but the programs need to stay alive and changes every few years were the norm. So we'll pay for it somehow and the logical option is changing the earn rate. Will we see lower earn rates on credit card spend? Will we see AIR MILES earning go from 1 per $20 spent at merchants to 1 per $25? By changing earn rates you aren't changing the value of your point or mile which means if and when this bill passes don't be surprised if we see earn rates drop over time.

Remember this is just Quebec at this time proposing this law  however it is setting precedent for other provinces. There is nothing stopping Ontario from amending theirs to include point value retention as well and after having two provinces with reward program rules in place it won't be long before we see other provinces follow suit.

In reality only a few programs will be affected by the proposal to make points expiry illegal

It has been quite the frenzy over the past 24 hours (we've completed 7 interviews and 1 more to go) in regards to the the proposed bill in Ontario that would make the expiration of points and miles illegal. In our post yesterday we wondered if the bill would cover both Expiry and Inactivity Rules or just Expiry. We hoped for the latter and Aeroplan reached out to us to let us know that:

"as currently drafted, the proposed legislation carves out an allowance for activity policies such as Aeroplan’s.  It will only affect programs with date-stamping policies.  Aeroplan’s activity policy, which requires that members conduct one transaction every 12 months, whether swiping your card at a partner brand or redeeming for a gift card or a flight for example, will remain unchanged from this legislation"

This is good news, if you have heard any of our interviews over the past day or so or later today you'll know that we agree with inactivity rules but not mileage/point expiration. What this means is that if the bill does pass and becomes law in reality it only affects 4 Canadia programs and hitting only 1 hard. Those four programs are AIR MILES, Starbucks Rewards, WestJet Rewards and MyHusky Rewards. Why do we say only one will be hit hard? Well Starbucks Rewards Stars expire after 6 months. That's not a lot of time. But it isn't hard to go to a Starbucks and redeem that Star for that free drink or food. Really easy and there should be no reason to hold onto a Star for 6 months. WestJet Rewards operates like a cash back program. You don't need a lot of WestJet dollars to redeem for a discount on your travel. All you need is 25 WestJet dollars if you don't hold their credit card. As soon as you hit 25 dollars you can redeem for 25 dollars off of a ticket. Again no need to hoard those dollars. There will be some people who maybe join WestJet rewards and have earned 1 dollar here and then three years later earn another that would stand to maybe lose a couple of bucks after 5 years. MyHusky Rewards also works like a cash back program and you only need 130 points ($65 - $130 in spending) to redeem those points for a coffee. So those three programs, you really shouldn't need to worry about expiration.

That leaves AIR MILES. They are the only program that will be seriously impacted by this bill passing. We can only assume there are several millions of AIR MILES Reward Miles set to expire at the end of this month based on the stories we have heard of members who have 5,000 miles to well over 25,000 miles that will be erased from accounts. Is this the fault of the members? No. We've heard countless stories of people planning to use their AIR MILES as a retirement travel fund, one couple that is set to retire in the next 2 or 3 years stand to lose over 25,000 miles that they had banked on using for that retirement. Its not that they have been absentee members, they have been active in the program and really really active to get to 25,000 miles as we all know it is quite hard to earn that many AIR MILES! The fact of the matter is AIR MILES made money on those miles that these members are holding. It isn't like a frequent flyer or frequent guest program that awards points or miles for being loyal (ie WestJet giving you up to 5% on their flights is coming straight out of WestJet's pocket, there is no merchant buying those dollars from them), AIR MILES are sold to merchants for more than the value at which you redeem them at. They have made money on them and are looking at making more money by trying to expire them.

The one question we don't have an answer to yet is for international based programs. Many European and Asian airline programs do have expiry rules, in fact they have had them longer than we have here in Canada. Are you a member of Lufthansa's Miles & More program or Cathay Pacific's Asia Miles? Both programs expire miles 36 months after you have earned them. Numbers wise the membership in these programs in Ontario is probably only in the four or maybe five figures so it won't have as much impact as AIR MILES does. Butwhat jurisdiction do they fall under? Germany, Hong Kong or Ontario?  Typically contracts state they are governed by the laws of the province/state/country that the program resides in. So does that make the Ontario bill not valid for them? We are not legal experts so perhaps one of our readers who is could chime in!

Ultimately this new bill in Ontario only affects AIR MILES. No other program will feel the pain if it passes.

In Defence of Loyalty Programs

Recently, the loyalty industry has really taken it on the chin.  The latest coming from the results of a global study commissioned by Aimia on the perceived value of reward programs. Aimia (operators of Canada's Aeroplan program) polled more than 20,000 people representing 11 countries and came to the conclusion that collectors don't feel they're getting enough value in return for the personal data they give up.

But as much as we love to moan and groan about these programs one thing remains clear -- they're not going anywhere any time soon.  Marketers love the ability to target customer segments and create tailored offerings with the hope they will increase their likelihood to buy. The premise is simple -- the more information a marketer knows about its customer's buying preferences the greater their ability to put something in front of the customer of relevance.  Are there opportunities for improvement?  You bet.  But I think it's important to remember the bigger win/win these programs represent.  No one wants to go back to the days of clipping coupons and taking packaging flaps back to your favourite grocer.  Loyalty programs drive innovation and simplify the way we convert our loyalty into currency.  In the case of coalition programs -- they allow collectors to pool and save up points for something bigger like a trip or tickets for special event. Yes, like many, I've been frustrated with how difficult it can be to redeem for higher demand items. But the frustration quickly disappears when I do cash in and feel like I've somehow beaten the system by getting something for free. I don't have an exact number but believe I've gained more than five figures worth of value from loyalty programs, sit on close to 3 million points and miles and know some Rewards Canada readers who have racked up as much as six figures worth of savings.

How about you? Do you agree with the survey? Do you like sharing personal info like shopping habits to increase your ability of points earning and redemption?

See the full size infographic on Aimia

CardSwap.ca SwapPoints review + $100 CardSwap Credit Giveaway

The following post is another in Rewards Canada's growth outside of the travel rewards industry by looking at and reviewing non-travel loyalty programs:

If you are a fan of CBC's Dragon's Den, you may recall this company, if not don't fret here is a YouTube vid of their appearance on the show.

CardSwap.ca is a company that allows Canadians to buy and sell gift cards. At the time of the Dragons Den appearance CardSwap ran a different business model than they do now. I actually took advantage of CardSwap once by selling them a Brick Gift Card I won in a local lottery and would never use. The card was worth $100 and they paid me $74 for it. Sure I lost out on the value but that is why CardSwap is around, so that you can get something instead of nothing if you were not planning on using the gift card. CardSwap would then turn around and sell the card below face value but higher than what they bought it off me at. That is where the company made its money, the difference between the purchase and sale price of the gift card. The initial marketing stated you could save up to 40% versus buying the gift card at the actual retailer or any place that sold the cards. By selling them below face value they hoped to attract the many frugal Canadians looking to get a deal.

Fast forward to 2012 and CardSwap has changed their business model into one that focuses more on a loyalty program rather than a straight discount. Which is why they are being featured here today, because of their CardSwap SwapPoints program. Instead of gift cards being sold at a discount on CardSwap they are now sold at face value. Wait a minute why would someone go the CardSwap and pay face value for a gift card when they can get them on their day to day travels to various stores? That’s where the new SwapPoints program comes in. When you buy a gift card from CardSwap you are awarded SwapPoints for that purchase.

Earning

The amount of points you earn depends on what CardSwap paid for the card and what margin they want to get for the sale of the card. Looking through the site it looks like you get the equivalent of 2% to 10% of most of your gift card purchases back in SwapPoints but I did even see one card even coming in at almost 42%. The return is all dependent on the value of the card and who the retailer is. 

Redeeming

Those SwapPoints can then be redeemed for other gift cards, prepaid Visa Cards and even cash into your PayPal account. The standard redemption rate runs is 1,000 SwapPoints = $10 and 1,000 points is the minimum redemption amount. Typically this means you will have to make several gift card purchases from CardSwap before you start seeing a return. Frances Ho, one of the founders of CardSwap explained to me that most people will need to spend between $100 and $300 to get to the 1,000 point level. Before the change in their business model it didn’t matter whether you purchased 1 gift card or 10 gift cards, you saw the savings right away as those cards were bought at a discount.

 

As an entrepreneur and business major I had a hard time at first getting my head around the change CardSwap did with their business model because it could drive away one time buyers and first time buyers who are unsure if they would return for another purchase. As a loyalty consultant, I can understand from their end why they would make the change however. First is the term ‘loyalty’, they want people coming back to use their service so by moving to a points system they are hoping to encourage people to keep returning so they can build up enough of a balance to redeem. As is seen with any loyalty program another reason you go to a points or miles based system is that you bank on breakage.

What is Breakage?

In the loyalty world, Breakage is the number of points or miles that go unredeemed and are lost by program members either through account inactivity or point/mile expiration. Depending on the industry, typical breakage rates that loyalty programs try to achieve run between 10 and 25%.

So, I would place a guess that CardSwap initiated this change banking on the fact that some users would be attracted at first by the SwapPoints program but in the end may only buy one or two gift cards and never earn enough SwapPoints to make a redemption. That allows CardSwap to enjoy much better margins on the gift cards sold to these type of buyers rather than the smaller margins they saw before when the card was sold up front with a discount. I would be curious to see what CardSwaps numbers are like today in comparison to the old model as I would think that people who are one off buyers and not enticed by the SwapPoints loyalty program would forego buying cards via CardSwap and get them at the retailer (especially for us savvy points collectors who buy the cards at grocery, gas or drug stores on a credit card that has those particular category multipliers... I know I do)

Is SwapPoints a worthwhile program?

Absolutely, for the right type of person. If you are someone who regularly buys gift cards for yourself or as gifts then you should definitely utilize the CardSwap avenue.  You will see savings on your gift card purchases once you start building up your SwapPoints balance and using those points either for more gift cards, the prepaid Visa cards or cash via PayPal.

At this time, CardSwap is offering $5 for free when you join their SwapPoints program so it is entirely possible that you could reach the 1,000 or $10 level with only one purchase of the right gift card.

Selling Gift Cards
Of course there is always the other side of CardSwap, but it doesn’t have anything to do with loyalty and that is the selling of gift cards to them. It is only fair to mention it however as it is vehicle behind the purchasing side of CardSwap. Essentially what happens is if you have an unwanted gift card you contact CardSwap with the retailer name and value and they will get back to you with an offer. If you accept the offer they will provide you a prepaid shipping label to send the card in and once they receive the card and confirm it is valid they will send you a cheque or credit your account with SwapPoints.

In conclusion, if you are someone who regularly buys gift cards then there is no reason you shouldn't sign up for CardSwap. However if you are like me and only buy gift cards once a year or even less then the process of signing up for Card Swap and earning some points that will never be used won't be worth it since you are still paying face value for the card and you have to wait for it to be shipped out. I would rather take advantage of bonus Air Miles or Club Sobeys Points (hence Aeroplan Miles) offers from places like Safeway or Sobeys when they are occasionally run, not to mention the fact that if I buy those cards from a grocery store I'll earn double Membership Rewards points on my American Express Gold Rewards Card.

Contest!
Now, to the fun part! CardSwap offered me a $100 credit to try their site out but I am not much of gift card person and I asked Frances if I could instead offer it to one my Rewards Canada readers. She agreed and here is what you have to do to be entered to win the $100 CardSwap credit.


1. Follow @RewardsCanada on Twitter 

2. Visit CardSwap.ca and find a gift card you think you would use the credit on

3. Tweet us the card you would pick, include @RewardsCanada @CardSwap and Hash tag #rewardscanada in your tweet 


Copy, paste and complete this to make it easier:



@RewardsCanada @CardSwap I would choose the (INSERT MERCHANT NAME) Gift Card #rewardscanada

4. Wait to see if you are chosen as a winner

!

Contest Details

- Deadline for entry tweets is 11:59pm MST on November 29, 2012

- Open to all Canadian residents (I love that Quebec raised their limit above $100 to have to register with them)

- Limit of 1 tweet per day/twitter account

- If you win, you don’t have to use the credit on the retailer you put in your tweets just in case you find another one of interest




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