How GDPR Affects Loyalty Card and Reward Program Data Collection
Understanding how personal data is used, stored, and shared has become a cornerstone of modern business ethics and compliance, particularly since the introduction of the General Data Protection Regulation (GDPR). Among the sectors significantly affected are retail and service-based industries that utilise loyalty cards and customer reward programmes. These initiatives, while offering benefits to both consumers and businesses, are deeply rooted in the collection and analysis of personal data. With GDPR in full force since 2018, the legal and practical implications for organisations running such programmes have been transformative.
The loyalty schemes offered by supermarkets, coffee shops, travel companies, and many other businesses are designed to incentivise repeat purchases, establish brand affinity, and provide tailored offers. To achieve this, companies rely on a detailed understanding of their customers — from shopping preferences and purchase history to contact details and even location data. However, under GDPR, the nature and scope of data that can be collected and processed must be tightly controlled and justified.
This sweeping regulation, aimed at protecting the fundamental rights of individuals in relation to their personal information, has forced businesses to rethink how they design, manage, and sustain their customer engagement initiatives. Let’s break down the exact impacts and challenges that GDPR poses for loyalty and rewards schemes, and explore how businesses can navigate this new terrain successfully.
The Scope of Personal Data in Loyalty Programmes
Loyalty schemes typically require users to provide identifiable information such as name, email address, phone number, and sometimes demographic details like age and gender. Beyond this, even more detailed behavioural data may be tracked: purchase history, frequency of store visits, product preferences, and in some cases, geolocation data if the programme is app-based. Many of these data types are categorised under GDPR as personal data, and their use is now subject to strict scrutiny.
Under GDPR, the term “personal data” has a broad definition. It includes any information that relates to an identified or identifiable living individual. In the context of loyalty programmes, this means virtually every touchpoint — from sign-up forms to in-app tracking — can fall within the regulation’s remit.
For companies, this redefined scope means that data previously considered benign or of minor concern is now categorised as sensitive. The business must not only consider what data it needs but ensure that data collection is justifiable, minimised, and secure.
Obtaining Clear and Informed Consent
A primary pillar of GDPR is that consent must be freely given, specific, informed, and unambiguous. Prior to the regulation, many loyalty card applications buried consent in lengthy terms and conditions or assumed implied consent. GDPR prohibits such practices. Now, customers must actively opt-in to data collection and processing activities.
For instance, when a customer signs up for a loyalty card, the organisation must explain clearly what data is being collected and why. It must also detail how the data will be used and inform the customer of their rights — including the right to withdraw consent at any time.
Importantly, consent cannot be bundled. Companies cannot require users to consent to marketing communications as a condition for joining the loyalty programme unless marketing is intrinsic to the service. Additionally, companies must keep records of when and how consent was given, making the process accountable and auditable.
This shift has led many businesses to redesign their loyalty on-boarding processes, often employing layered consent approaches that not only comply with legal standards but also foster trust and transparency with customers.
Purpose Limitation and Data Minimisation
GDPR enforces the principle of purpose limitation, meaning personal data collected should only be used for specified, explicit, and legitimate purposes. For loyalty programmes, this implies that the data gathered should be directly tied to the operation and enhancement of the programme — such as rewarding points, personalising offers, or understanding purchasing behaviour within a defined context.
Simultaneously, the principle of data minimisation requires that only necessary information be collected. For example, if verifying a customer’s identity can be achieved through an email address alone, requesting additional details like a date of birth must be rigorously justified.
These principles challenge businesses to assess their data habits critically. Collecting “nice-to-have” data purely for potential future use is no longer acceptable. This has prompted firms to undertake comprehensive data inventories and revise their data collection frameworks accordingly.
Storage Limitation and Data Retention Policies
Another essential tenet of GDPR is that personal data should not be retained for longer than necessary. This has notable implications for loyalty and rewards programmes, which often operate over many years and may continue to store data from inactive users indefinitely.
Organisations must now establish and enforce clear data retention policies that specify how long customer data will be retained and the criteria used to determine this period. Importantly, these timeframes must be communicated to users in privacy notices and other relevant documentation.
For example, if a member hasn’t engaged with the programme over a defined period — say, 24 months — the company might be required to delete their data or at least remove identifying details. These rules not only help ensure GDPR compliance but enhance overall data hygiene.
Rights of the Data Subjects
GDPR affords individuals comprehensive rights over their personal data. These rights significantly affect how loyalty programmes must operate and respond to customer requests.
Among the key rights are:
– The right to access: Participants can request details on the personal data held about them.
– The right to rectification: Users can demand corrections to inaccurate or incomplete data.
– The right to erasure: Also known as the “right to be forgotten,” this allows users to request deletion of their data under certain conditions.
– The right to data portability: Customers can obtain and reuse their personal data across different services.
– The right to object: Individuals may object to specific types of processing, such as direct marketing.
Loyalty programme administrators must have structures in place to respond to these requests promptly, typically within one month. This means maintaining flexible databases, ensuring frontline staff are trained in data rights, and integrating technological capabilities that allow for easy data retrieval and modification.
Third-Party Sharing and Data Processors
Many loyalty schemes involve collaboration with third parties — including marketing agencies, analytics platforms, and cloud storage providers. Under GDPR, both the company controlling the data (the data controller) and those processing data on its behalf (data processors) have distinct responsibilities and must be governed by appropriate contractual arrangements.
It’s now imperative that businesses assess and audit their entire data supply chain. Any third-party partner must be able to demonstrate GDPR compliance, and the relevant data processing contracts must detail responsibilities, security measures, and the scope of processing allowed.
If a loyalty programme is integrated with a partner’s service — such as issuing points redeemable with another brand — the data sharing must be transparent and justified. Customers must be informed exactly who receives their data and for what purpose.
Securing the Data
GDPR requires that organisations implement appropriate technical and organisational measures to secure personal data. For loyalty schemes, this involves safeguarding customer information across various digital and physical touchpoints.
At a technical level, this might include encryption of stored data, secure access controls, two-factor authentication for databases, and regular cybersecurity assessments. Operationally, it means educating employees about data protection, limiting data access to necessary personnel, and documenting security protocols.
A data breach, especially one involving sensitive loyalty data, not only risks reputational damage but also triggers legal notification duties under GDPR. Companies are required to notify regulators within 72 hours and, in some cases, inform affected individuals. The incentives to prioritise robust data protection measures have never been higher.
Balancing Personalisation with Privacy
One of the major benefits of loyalty programmes is the ability to personalise user experiences. Customers receive relevant vouchers, targeted recommendations, and timely reminders. Yet personalisation inherently relies on profiling — the automated processing of data to evaluate personal aspects. GDPR introduces specific rules on profiling, particularly if it significantly affects users.
While profiling is not banned, it must be conducted transparently. Participants should understand how and why their data is being analysed, and they must have the chance to opt-out. Additionally, if automated decision-making takes place — for example, suspending accounts based on algorithmic thresholds — the business must offer a means for manual review.
For many businesses, this means drawing a fine line between offering value and overstepping into invasive data handling. Modern GDPR-compliant loyalty schemes must emphasise relevance without compromising on privacy.
Rebuilding Trust and Value
Interestingly, while GDPR imposes stricter requirements on loyalty programmes, it also opens a path to higher levels of customer trust. Transparent data practices, clear communication, and genuine respect for privacy rights can set a business apart in a crowded marketplace.
Modern consumers are increasingly data-aware. They are more likely to engage with brands that demonstrate ethical, responsible behaviour. Thus, reframing loyalty through the lens of data stewardship not only ensures compliance but also potentially enhances brand loyalty and customer satisfaction.
Conclusion
For businesses operating loyalty cards and rewards programmes, GDPR has reshaped the way customer engagement is executed. From gaining proper consent to ensuring data minimisation, transparency, and security, compliance is now a multifaceted responsibility that touches all elements of programme design and delivery.
Rather than seeing GDPR as a hurdle, forward-thinking companies are using it as a catalyst for innovation, prioritising value-driven, privacy-conscious strategies. In doing so, they’re not only avoiding fines and reputational fallout but also forging stronger, more sustainable relationships with customers in a privacy-centric world.