By Yiying Li

Copyright abc

Cashrewards — a loyalty program which once had 2.5 million Australians in its database — has left many shoppers stunned after its abrupt shutdown last week.

The cashback website pays back its members a percentage of the purchase price in cash after they shop in its partnered retailers.

Its closure has also left many questions:

How do these cashback companies operate and make profits?Can consumers get their money back from their accounts?Are there alternatives?Should we be cautious about using cashback apps?

Let’s find out.

Why did Cashrewards close down?

At this stage, we don’t know.

Neither Cashrewards, nor ANZ Bank’s venture capital fund 1835i, which owns the cashback app, have made any public statements.

According to the Australian Financial Review, Cashrewards was failing to meet ANZ’s expectations, amid a wider review of the bank’s performance and profitability by its new chief executive, Nuno Matos.

What to do with your funds?

Cashrewards has urged its members to withdraw their funds by October 24 and submit any transaction queries by October 10.

When asked what would happen to the money if it remained unclaimed, Cashrewards’ CEO Anthony Seymour-Walsh tells the ABC that the company “intends to repay all customer monies”.

Customers will have their available funds automatically transferred to the linked bank account if they miss the October deadline, according to Cashrewards’ website.

All withdrawal claims must be received by December 12, it said.

How do cash back companies make money?

Cashback offers were essentially a form of discounting, said Andrew Brennan, a senior lecturer at Curtin University’s Faculty of Business and Law.

“Gaining a large member base, and therefore generating more sales for the retail partners, is good for profitability,” Dr Brennan told the ABC.

Using cashback apps wisely can help with the cost of living, but they also come with the possibility of overspending, according Dr Brennan.

“Everyone loves a discount, and it makes us feel good, with more money left over for other things to buy or we can put away for savings,” he said.

“If you buy products or items you would normally buy anyway, then a discount might be worthwhile to you.

“[However], you might buy something on impulse because it is advertised within the app as a ‘limited time offer’.

He added that exercising self-control was key.

Are there alternatives?

There are five cashback apps and sites to consider, including Cashrewards, which ranked as the top option, according to financial research agency Canstar.

The agency’s data insights director, Sally Tindall, said the sudden closure of Cashrewards left millions of shoppers scrambling to figure out what’s next.

“For those with uncashed rewards, the immediate priority is to get your funds out by the October 24 deadline,” she said.

“While it’s a shame to see an Aussie-owned cashback pioneer disappear, there are other similar brands still kicking around, such as ShopBack and TopCashback.

“Just be sure to read the terms and conditions and make sure you’re not spending more just because of the lure of money back.

What about privacy data?

To set up a cashback account, you need to first sign up as a member by providing your personal details, including your name, email address, and phone number.

As of September 8, Cashrewards had 2.5 million Australians signed up for its service.

“[Cashrewards] customer data will be held encrypted in a secure state for regulatory purposes and destroyed safely at the conclusion of any statutory period,” Mr Seymour-Walsh said.

“Members who request their data to be deleted will be actioned accordingly.”

Dr Brennan said that with free apps, customers need to be informed and comfortable with what kind of data was given away.

“Customers win by getting discounts with their viewing and buying habits recorded and tracked within the cashback app/website itself,” he said.

What can we learn from this as consumers?

“Clearly, these apps are popular amongst consumers due to the discounts they offer,” Dr Brennan said.

“Competition is usually a good thing for consumers, in the form of lower prices, decent rewards and potentially a better service offering.

“There is one less competitor now, with Cashrewards no longer supported.