When Tracey Hamilton received word that her Hudson’s Bay credit card would be discontinued as the retailer switched to new provider Neo Financial, she went online to see about getting a new card.
But when she saw that the application asked her for a selfie, as well as for an image of government identification such as a passport or driver’s licence, she began to worry about data security. Neo specified the information would be stored for 90 days, then deleted.
“That doesn’t sit right with me,” said Ms. Hamilton, 58, who has had a Bay card since her early 20s. She decided against applying. “[Neo is] a pretty new company, I don’t know them. ... It’s a lot to ask for.”
HBC chose Neo, a Calgary-based banking startup, to offer its store-branded credit cards in February after long-time partner Capital One Financial Corp. withdrew from the relationship. For Neo, it was a major opportunity to build its client base by tapping into one of Canada’s largest loyalty programs, with 7.5 million active members – and nearly two million Hudson’s Bay credit card holders.
But amid the switch, some cardholders took to social media to voice their displeasure. The hesitation of some card members such as Ms. Hamilton illustrates the sometimes awkward transition from loyalty programs built over decades with paper applications at department store counters, to a digital-first model. That generational shift has collided with the COVID-19 pandemic, which compelled customers to embrace digital shopping and payments but also cut off much of the in-person support many of them still rely on.
“We recognize that the COVID-related retail closures have impacted those who would have preferred to apply in-store,” Neo spokesperson Arianna Dametto said in an e-mail. “Fortunately, the vast majority of cardholders that have applied were able to complete the online application and receive their new cards, which for many would not have been possible without the new online application process.”
Applications for HBC’s old cards through Capital One could only be done in stores, but Neo allows applications on the web or through its mobile app, as well as an in-store option. According to HBC, nearly half of the applications for the Neo card have been submitted digitally, while the rest went through the process with the help of staffers at Bay stores.
“With more options, this is truly the most seamless experience we have ever offered,” Bay spokesperson Tiffany Bourré said in an e-mail.
Neo requires the selfie check when applying online, but it is not supposed to be part of the application process in store. Even so, when Toronto resident Doretta Wilson went to a store in early April, a staffer appeared to be using the Neo website on a tablet rather than in-store application software. Ms. Wilson agreed to the selfie, but she says the clerk told her other customers had walked away when asked to do the same.
Going to a store was not an option for Sue Johnston, who lives in Prince Edward Island, where there are no Bay locations. Ms. Johnston, 71, said she is relatively tech savvy but was also put off by the request for a selfie and other details.
“It was well beyond what you’d normally have to do,” said Ms. Johnston, who has had a Bay card for decades. “I decided I didn’t need it.”
Customers’ reluctance to hand over such information demonstrates a growing awareness around issues of privacy and security, as online services proliferate. Newer providers such as Neo may face more skepticism than big banks that have been handling sensitive information through online banking for years – and in some cases have had data breaches themselves.
Neo says the selfie is part of compliance standards requiring credit-card providers to know their clients. But while photo ID checks are standard when opening transaction accounts at banks, they are optional for credit card providers. Some other digital-first issuers confirm applicants’ identities using questions about other accounts or loans they already have.
Neo is led by two former senior executives from SkipTheDishes, the popular food delivery service. Last year, Neo raised $50-million in funding and debt financing from investors that include billionaires Peter Thiel, Shopify chief executive officer Tobi Lutke, former Dragon’s Den star Arlene Dickinson and Thomvest founder Peter Thomson. (The Thomson family holding company, Woodbridge Co. Ltd., owns The Globe and Mail.)
Neither HBC nor Neo would disclose how many Bay card holders have switched to the new Neo card, but both said they have been pleased with the rollout so far.
The old Bay cards stopped working on May 4, at a moment of fierce jockeying for position among credit-card providers, including major banks. Credit-card balances fell sharply during the pandemic as many customers spent less and paid down debt, helped by government stimulus funds designed to blunt the economic impact of lockdowns.
As more consumers become accustomed to making digital payments, it creates a window of opportunity for credit-card issuers – including digital-first startups such as Neo and Brim Financial – to entice borrowers to try a different card.
Retailers rely heavily on loyalty programs to attract and retain customers. For Ms. Hamilton, the free shipping she received with her old card was an incentive to shop at the Bay online. Having decided against the new card, she will now have to meet the Bay’s purchase threshold of $99 (or $29 for beauty items) for free shipping.
“If it’s something I really want [from the Bay] I will still buy it,” Ms. Hamilton said. “But it’s kind of discouraging me. … It’s not the first place I’m going to look.”
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