About a year ago, it looked like Air Miles was finished. A run of bad news had culminated in the bankruptcy of owner LoyaltyOne. Then Bank of Montreal bailed it out. 

It turns out that the prospect of consumers losing their forgotten stashes of  points in a bankruptcy proceeding was just what the business needed to rekindle interest. Canadians reactivated “tens of thousands” of dormant Air Miles accounts amid the program’s near-death experience, giving Air Miles president Shawn Stewart’s turnaround plan an unexpected spark.

“The silver lining is that it got people to remember the program, pull out their card and go visit the website again to see if they had any miles,” Stewart said in an interview. 

“That’s perverse,” he added. “Imagine creating that response through good news.”

Stewart and his new boss, BMO chief executive Darryl White, are about to find out what some good vibes will do. The revamped rewards program is set to get a big push from an owner that seems to think US$160 million was a bargain for a business that has data on the purchasing habits of some 10 million collectors. 

At a conference in January, White sounded like he could hardly wait to show off his entry in what has become one of the most interesting competitions in Canadian business. 

“We’re going to start putting more light on that program as we go through the next couple of quarters,” White said at the RBC Capital Markets Canadian Bank CEO conference. “The signs are very, very good. To have a proprietary program that we can run, integrate, own and bring to our customers is really exciting, particularly given the price we paid.” 

The loyalty business is a window on how macro forces disrupt things at ground level. For years, loyalty points were used primarily for marketing. Back in the 1980s and ’90s, they were a useful way for a business, whether a credit card company or your local video rental shop, to get people interested in what it was selling. 

Now, the value is in the data. Companies large and small can create profiles of individual customers by tracking what they buy, then target their inbox or text them with tailored offers. Selling stuff remains the primary mission, but technology has radically changed the way the game is played. 

“The ultimate objective here, and why you want loyalty, is to have great customer relationships that go beyond marketing,” said Stewart, who previously ran Canadian Tire’s Triangle Rewards program. “Big businesses have challenges seeing their customers across all their different channels, their branches, their stores, etc. So being able to consolidate and … have a single relationship with that customer across your entire business is hugely strategic and hugely important.”

The stakes are high—just take a look at who is getting involved, and how much some of them are willing to pay. Air Canada started Aeroplan in 1984, sold it in 2008 and then bought it back in 2019 for $450 million. Scotiabank, Cineplex and Big Three grocer Empire are partners in Scene+. Tim Hortons last year teamed with Neo Financial on a credit card tied to its rewards program. RBC, the country’s biggest bank, and Loblaws, the country’s biggest grocer, each have their own loyalty programs. 

And in October, Canadian Tire paid almost $900 million to purchase Scotiabank’s stake in its banking arm so it could take full control of the Triangle Rewards program. Some analysts balked at the price, but chief executive Greg Hicks insisted the naysayers were missing the bigger picture, including the fact that Scotiabank’s bet on Scene+ made it a competitor, not a partner.   

“The consumer loyalty landscape in Canada is moving extremely quickly with partnerships being formed at pace,” Hicks told analysts on the company’s third-quarter earnings call in November. “We have worked really hard to build a compelling and leading loyalty program in Triangle Rewards, and our intention is to remain a leader. That’s why the timing is now.”

The doubts about Hicks’s decision to pay a premium for control of Triangle is an example of how markets continue to struggle with how to value data, even though Google and Facebook showed long ago that intangible assets are worth more than tangible ones. New stores or inventory would do little to boost Canadian Tire’s revenue amid a broad decline in consumption due to inflation, higher interest rates and elevated levels of household debt. But sales generated by “one-on-one” offers to Triangle members doubled in the third quarter, Hicks said. 

Economic models and theories that neglect data and other intangibles are obsolete. The loyalty wars will bring other abstract issues into focus. Policymakers and regulators will have to become more nimble, as the data rush will raise privacy concerns and threaten competition, because the biggest companies will control the largest stores of data. 

But the pros should outweigh the cons. Air Miles might be owned by a charter member of Canada’s banking oligopoly, but Stewart’s strategy could be good for competition. 

Most loyalty programs operate as walled gardens, luring customers into the compounds of the companies that own them. Stewart sees Air Miles as a platform for retailers and service providers who lack either the resources or the desire to set up their own loyalty programs. Collectors can visit the site and find portals to everything from Lululemon to their dentist, earning reward miles as they shop. 

“Our strategic direction is to make this an open-source loyalty platform,” Stewart said. “You can think of us more as a technology company in that sense, [one] that is available to merchants if they want to use and access the scale of our nearly 10 million collectors and the power of our currency.” 

A fight for dominance in the loyalty business could be good for consumers, assuming whatever benefits they get from collecting points aren’t offset by higher fees or sticky prices at elevated levels. But households will have to stir themselves to take advantage. There’s a longstanding notion that Canadians are passive shoppers who are too willing to pay the first price they see.

“To really get the most out of programs today, you have to put in a little more effort,” Stewart said. “We’re asking you to put in a little more effort,” he continued. “If you don’t have the credit card, you can still earn a ton of miles—if you pay attention.”

Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.