Need to know
- Cashback sites collect your data when you sign up
- Your data is used to create targeted or personalised advertising
- Cashback sites share your data with third parties
Cashback sites offer people cash rewards simply for using their link to navigate to a retailer's website when making an online purchase.
The cashback sites – Cashrewards, ShopBack and Kickback are popular ones in Australia – partner with selected retailers, each offering either a percentage discount or a fixed sum discount on purchases.
It seems an easy way to save a bit of money, so where's the harm? As always, it's important to start by asking 'what's in it for them?'.
How cashback sites work
You first need to sign up as a member, which involves handing over personal information such as your name, email address and phone number.
Then you can browse the cashback site for retailers you'd like to shop with, and click through to be redirected to their site (you'll notice a special URL is generated which allows your purchases on the retailer's site to be linked to your cashback account).
You then make your purchase on the retailer's site just as you normally would.
You first need to sign up as a member, which involves providing personal information such as your name, email address and phone number
Once the purchase is complete, the retailer pays a commission to the cashback site, who passes on the advertised cashback amount to you. This amount then appears as a credit in your account on the cashback site.
For example, if you buy a $100 pair of sunglasses on a site that promises 4% cashback, you'll receive a credit of $4 in your account.
Finally, you can withdraw your cash credits from your cashback account, to be paid into your nominated bank or PayPal account.
Note that most cashback sites have a minimum withdrawal amount of about $10, so you may need to make several purchases before you can redeem your cash credit.
Popular with Australians
Cashback sites are rapidly growing in popularity, with millions of Australians now signed up to these services.
ShopBack has 1.5 million Australian members, with 458,822 of them considered active members, meaning they've used the site to make a purchase in the last 12 months.
Cashrewards has 1.1 million Australian members, 260,000 of them active members.
How much can you save?
The advertising spin for some cashback sites may mention cashback rates as high as 95%, but most offers range from one percent to 10% cash back, with common amounts hovering around the three-to-six percent range.
On top of this, the higher cashback percentages sometimes come with a cap on the maximum amount you can claim back.
In other cases, retailers offer discounts of a set amount, for example $35 off, but these are generally for sign-up services with a high total cost, such as internet and energy plans.
How cashback sites make money
The basic business model of cashback sites is fairly simple. They make a commission from the retailer every time they refer a shopper to their site who completes a transaction.
They pass on some of this commission to the shopper in the form of a cashback reward and then pocket the remainder for themselves.
This means they make money every time someone makes a purchase using the retailer's link on their site.
The sharing of valuable consumer behaviour data also seems to be an unspoken part of the bargain
This commission arrangement seems to be win-win for both the consumer and the cashback site, but what do the retailers get out of it?
On the face of it, customers. The idea is that just as retailers spend money on advertising to attract customers to their sites, the retailers pay the cashback site a commission to send shoppers their way.
According to the cashback sites, their offering is merely another marketing channel for retailers.
So the financial arrangement between the cashback site, the consumer and the retailer appears straightforward on the surface. But according to CHOICE consumer data advocate Kate Bower, the sharing of valuable consumer behaviour data also seems to be an unspoken part of the bargain.
Why you should be wary about cashback sites
Cashback sites appear to offer consumers a great deal – simply provide a couple of personal details, click through their website and shop as you normally would and you'll receive cash back in your pocket.
But as Bower explains, many consumers may not fully understand the relationship they're entering into when they sign up to one of these sites.
What information are they capturing about you?
"When you use a cashback site, you're agreeing to hand over a lot of data about yourself," Bower warns.
"People tend to focus on the personal information they provide during the sign-up process, like their name, email and date of birth, but what's much more valuable is your consumer data, which is collected by tracking your online shopping behaviour," she explains.
And it's not just your online transactions that make up this data. Most cashback sites capture much more information than consumers might assume.
Cashrewards captures information from your transactions that could allow them to infer information about your health sexual orientation or practices, ethnic origin or religious beliefs
For example, ShopBack captures your location data, even when you aren't actively using the app or website, as well as data from third parties including social media providers and Google.
Kickback captures social media profile information and location data.
And Cashrewards captures information from your transactions that could allow them to infer information about your health, sexual orientation or practices, ethnic origin or religious beliefs.
While Cashrewards told us it's inaccurate to say it actively pursues or uses this information, the company does have access to it, and you give Cashrewards permission to collect it when you use the site.
What are they using your data for?
Although all three cashback sites we looked at for this article explicitly claim that they don't sell user data or information, Bower says that doesn't mean they aren't using it to make money.
"Consumer behaviour data is incredibly valuable to businesses. It can be used to manipulate and influence consumers through direct marketing, behavioural advertising and even personalised pricing."
"This means businesses may be using your data to convince you to buy things you don't need or even to charge you higher prices for certain items," she says.
You're essentially agreeing to give these companies information on how to get you to spend more money
Kate Bower, CHOICE consumer data advocate
The privacy policies of the cashback sites state that they use your data to do things including "deliver relevant advertising", "personalise the website experience and/or the advertising hosted on our website" and "analyse, maintain and improve our service and its promotion".
While these uses all sound vaguely positive, Bower says what they really mean is that they're using your consumer data to make more money out of you.
"When you hand over your consumer behaviour data, you're essentially agreeing to give these companies information on how to get you to spend more money," she says.
Who are they sharing your data with?
Perhaps the most worrying fact about these sites is that they're not just capturing your data for their own use.
Their privacy policies contain a long list of third parties they share your personal data with, including the retailers they partner with to deliver their service.
This means that when you shop through a cashback site, you're agreeing to potentially have your data shared with thousands of retailers, who can then use that information to create advertising targeted to you or to others who fit your consumer profile.
Their privacy policies contain a long list of third parties they share your personal data with
"When you take into consideration the value this consumer data has for the retailers that partner with the cashback site, the financial arrangement between them starts to make more sense," says Bower.
"Yes, they're paying the cashback site a commission in return for sending a shopper their way, but they're also receiving all the consumer behaviour data the cashback site has on that shopper."
Should you use cashback sites?
While many consumers may be surprised to learn how much of their consumer data is being captured and shared when they use these sites, Bower says the decision on whether or not to use them still comes down to personal choice.
"With the cost of living currently so high, I can understand why consumers are attracted to these sites," she says.
"Consumers should simply be aware of what they're actually handing over when they sign up to these sites, before deciding whether or not it's a deal they're willing to make."
Consumers should simply be aware of what they're handing over when they sign up to these sites
CHOICE consumer data advocate Kate Bower
Bower believes stricter regulation over the use of consumer data is essential for keeping the online marketplace fair for consumers.
"There's currently an imbalance between what consumers know about businesses, and what those businesses know about their consumers," she explains.
"We need to regulate how businesses are allowed to collect and use consumer data, in order to put the power back into the hands of consumers."
CLARIFICATION 25/11/22: We updated this article to make it clear that Cashrewards doesn't actively pursue sensitive information, but that the company may have access to it as a result of your use of the service.
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