Loyalty card industry taking more hits

Another divorce in Canada’s loyalty card sector has consumers stuck in the middle asking questions about the future of an industry still bruised by the actions of some of its largest providers.

The Canadian Imperial Bank of Commerce announced this week it is severing ties with Loblaw’s President’s Choice Financial and rolling PC’s two million bank accounts into its Simplii Financial brand starting Nov. 1.

It is the latest split between loyalty programs and the country’s banks, which are increasingly moving toward digital banking, following prior breakups between Shopper’s Drug Mart and Royal Bank of Canada and Costco and American Express. TD took over from CIBC as the primary card for Aeroplan, while Air Canada recently said it plans to move away from Aeroplan to start its own loyalty program after 2020.

Technology and the structure of loyalty programs have dramatically changed since CIBC and Loblaws partnered almost two decades ago, said Jacques Nantel, marketing professor emeritus at the University of Montreal’s HEC business school.

The industry has been going through an upheaval, he said, because of the high cost to retailers of operating a rewards program.

“The payback is not what it used to be.”

CIBC’s experience running the PC Financial online banking operation will allow it to compete with rivals such as Tangerine, while Loblaws will focus on its credit card and PC Plus loyalty program, said Patrick Sojka, a travel rewards expert and founder of RewardsCanada.ca.

“Even though banks are still making tons of money they are trimming the products that aren’t adding enough to the bottom line,” he said.