The U.S. firm that owns Air Miles in Canada is building a massive database in Texas that holds information on shopping habits, credit details, and other information on more than six million Canadian households and 72 million Americans.
Alliance Data Systems Corp. of Dallas already has one of North America's largest stores of information on consumers and says it wants to expand.
More than 60 per cent of Canadians hold Air Miles cards. The cards give points for air travel and other perks when used at hundreds of participating businesses, such as Bank of Montreal, the Liquor Control Board of Ontario, and Shell service stations.
Names, addresses and other information from the Air Miles program are held in files at the Dallas headquarters.
Air Miles insists the data is properly protected, used only by the Canadian program, and separately maintained.
Alliance is about to take the company public and says its database holdings put it in a good market position.
"We have captured detailed purchase information on approximately 72 million U.S. consumers and 6.5 million Canadian households", it says in a filing to U.S. stock market regulators.
"The continuing shift to electronic payment systems -- namely credit, debit, and pre-paid cards -- generates highly valuable information on individual consumers", says the submission to the Securities and Exchange Commission. "The dramatic proliferation of computer technology has enabled companies to capture, access, and use this information easily and almost instantaneously."
New privacy laws -- including Canada's -- and consumer sensitivity to information protection could lower profits and reduce the amount of legally available information, it says.
Even so, Alliance wants to expand its databases and go for a bigger share of the lucrative data-mining market.
"Companies increasingly seek services that compile and analyse customer purchasing behaviour", its financial prospectus says. "By combining massive amounts of detailed data with our proprietary data mining ... we provide our clients with highly successful and sophisticated targeted marketing solutions."
Alliance declined comment yesterday, except to say it protects privacy. It has filed for a 13-million share initial public offering worth about $180 million US on the New York Stock Exchange. The company said that U.S. trade regulations prohibit it from discussing its business activities while the public offering is pending.
It believes there is more business than ever in the data field.
"To the average Canadian consumer, what they are doing may appear to be a revelation about trafficking in personal information", privacy expert David Jones said yesterday. "But to people in business, to anyone with an interest in building customer loyalty, this is common knowledge. It's a $1 billion a year business", said the head of Electronic Frontier Canada.
"This is exactly the kind of information trading Bill C-6 (the new federal privacy law) was designed to address. Not to prevent it but to say you have to have informed disclosure."
Alliance's data on consumers comes partly from tracking swipe cards and other loyalty programs.
Information can be as detailed as the colour of a sweater purchased or the octane level of chosen gasoline.
Air Miles says that, while Alliance collects detailed data in the U.S., information collected from Canadian Air Miles customers is not as extensive. Air Miles only records the time, date, place, and value of Canadian transactions.
"Whatever you bought up here, we don't know that", said John Wright, a senior vice-president in Toronto.
"They collect detailed information for their purposes, ours is different."
Names, addresses, and other account information on Canadian card holders is kept in Dallas. Details on each transaction is sent there, to be matched to appropriate accounts.
Air Miles says it gives card holders extensive information on how personal information will be used.
Businesses involved in Air Miles, a program run only in Canada, join to reward good customers and create opportunities to find new ones.
"If you're a Shell customer but not a Bank of Montreal customer, we market together and send you coupons and mailings", said bank spokesman Joe Barbera.
"There is an understanding on the part of Air Miles sponsors that we do cross-pollinate our customer bases in the interest of reaching more clients."
But the information is not shared outside the Air Miles program, Wright said.
Privacy is protected by agreements with the Canadian businesses.
"Our members are in a separate data file from the rest of Alliance's business. If they expand, it's not going to be with our information", said Wright.
Alliance acquired Air Miles in a 1998 buyout of The Loyalty Group, the program's founder. Air Miles has 600 employees in Toronto, Montreal, and Calgary.
Alliance gets data from all parts of its business.
It processes electronic payments by debit and credit card, handling 1.8 billion of those transactions in 1999.
It provides credit services for 50 private-label credit cards, with 54.4 million cardholders.
And it mines its data for details that can help retailers, gas companies, utilities, and others find and keep clients.
All that information goes into databases, including personal details.
"But we maintain the confidentiality and privacy of these individuals as required by law and by our own corporate policy", said Alliance spokesman Steve McGregor.
Data mining has become controversial as technology makes honing in on personal information more advanced.
Hundreds of firms keep information on consumer habits -- to try to create loyalty and gain new market share.
At the LCBO, Air Miles users earn one reward mile for every $20 spent at Ontario's 600 liquor outlets.
The program rewards top customers and gives the LCBO broad, useful information about buying trends.
There is no reason to worry about privacy because security firewalls are up, said LCBO spokesman Chris Layton.
"We don't know the identities of people who are buying, Air Miles is the only one that knows."