Woolworths and Coles have passed assessments of the way they apply big data analytics to customer loyalty information, but it didn’t stop the privacy commissioner issuing a general warning about joining such schemes.

Australian Privacy Commissioner Timothy Pilgrim said that 88 percent of Australians are now members of a loyalty program.

As a result of the uptake, the Commissioner decided to independently vet whether “Australia’s two largest loyalty programs” handled personal information as they said they did in privacy policies.

A particular focus of the commissioner’s assessments related to the data analytics that the two retailers applied to their troves of loyalty data.

But both schemes passed without any major issues or discrepancies being identified.

Pilgrim said that the data in Coles’ flybuys scheme was locked down, with “identifiable personal information” available only to one team for the purposes of personalised marketing.

Analytics on the data was performed in a separate area: the data sets it could access were de-identified and covered only limited fields of information.

“Coles advised that they do not attempt to build profiles about individual customers,” the commissioner said.

“At the individual level, they keep a record of the campaigns that have been sent to each customer to avoid repetition or duplication.”

Woolworths, likewise, was most interested in using its Rewards data for marketing, and did so by analysing “past purchasing behaviour in order to determine which products and offers are most relevant for members”.

All analysis was conducted for marketing purposes only, and used de-identified data.

The commissioner concluded that it appeared both schemes analysed data as they said they would in published terms and conditions and privacy policies.

However, he used the review as an opportunity to issue a general warning about participating in loyalty programs.

“While it’s encouraging to see that Coles’ flybuys and Woolworths Rewards each had appropriate privacy notices that were consistent with their practices, it’s important that all Australians understand the bargain we strike with a retailer when we join a loyalty program,” Pilgrim said.

“There’s no such thing as a free lunch, nor a free flight. The data that loyalty programs collect is valuable, and personal. So in this case, there is a price for the rewards from these programs.”

Despite no evidence of it being done by the two biggest schemes, Pilgrim remained concerned about programs that might be used in future to build composite profiles of customers.

“The details collected in these programs might seem insignificant on their own but when merged together they can paint a picture of who we are, what we do and how we behave,” he said.

“This information is worth a lot to organisations. So it’s important that we understand the terms of the programs we join — especially what privacy protections they include.”

Pilgrim urged loyalty card users to stay abreast of the privacy policies of the schemes to which they held membership.

He also said that “some of Australia’s other popular loyalty programs” would be up for assessment “in the coming year.”

Information Age reported last month that satisfied consumers are more likely to hand over a greater amount of data to retailers.