Rewards app ChaChing unveils plan to combat online 'stealth tax'

29 April 2024, 15:31 | Updated: 30 April 2024, 05:47

A new rewards platform backed by some of Britain's most prominent retailers and technology figures will be unveiled on Tuesday with a promise to aid consumers' fight against what it calls an online 'stealth tax'.

Sky News has learnt that ChaChing, which will launch in the UK this week before going live in the US next month, is in the process of raising tens of millions of dollars from high-profile investors to back its rollout.

The new venture will deliver cash back to consumers by enabling them to buy thousands of products directly from it, countering spiralling advertising fees charged by tech giants such as Google and Amazon.

It argues that the auction model employed by those behemoths have driven up advertising costs to the point where retailers are now forced to spend up to 50% of the value of each online sale on promotional costs in order to maintain search engine results.

The company cited research showing that online beauty retailers relied on search advertising on big tech platforms to drive more than 80% of their site traffic.

Among ChaChing's co-founders is Alastair Lukies, who founded the previously listed fintech Monitise and served as Britain's fintech ambassador during David Cameron's premiership.

People close to the company said it had signed up retailers such as Debenhams, which is owned by Boohoo Group, and Fenwick's, the department stores, and TM Lewin, the formalwear chain, as merchant partners.

It has also secured backing from prominent business figures such as John Thompson, the former Microsoft chairman, the Abrdn chairman Sir Douglas Flint and Garry Lyons, a former chief technology officer of MasterCard.

David Kershaw and Bill Muirhead, two of the co-founders of the London-based ad agency M&C; Saatchi are also involved.

ChaChing's central mission is to address the growing proportion of revenues that retailers using the biggest technology companies to sell online must hand to them in advertising fees.

It said it could achieve this by allowing merchant partners such as retailers to choose their cost-per-order, with the majority of that then immediately passed on to the consumer.

For consumers, it added, the ChaChing model would save between 15% and 50% on their online purchases, with instant 'payback' handed to them after they check out online.

One example cited by the company was a customer buying a pair of trainers for £100, which the retailer had spent £20 advertising on ChaChing; the customer would then receive up to £18 back via an immediate transfer into their bank account.

ChaChing would retain the difference.

The launch of ChaChing comes as rising regulatory concerns about the power wielded by the world's biggest technology companies.

In the US, Lina Khan, chair of the Federal Trade Commission, has referred to the sums charged by companies including Amazon for digital advertising as anti-competitive.

"The FTC and its state partners say Amazon's actions allow it to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon," the watchdog said last September.

ChaChing, which is also involved in a separate campaign group called 'Axe the Tax', is plotting a wide-ranging and protracted initiative to draw attention to the issue.

"I am sure consumers will be shocked to discover the existence of what the industry is calling the 'big tech tax'," Mr Lukies told Sky News.

"Even the savviest shoppers will be caught in this trap, which is driving up the cost of living at a time when so many are counting the pennies.

"Most retailers will be painfully aware of rising online advertising costs, which have been eating into margins at an ever-increasing rate.

"They would love to make sure their customers have a more rewarding experience when shopping online."

ChaChing is understood to be weeks away from concluding a funding round that will provide it with tens of millions of pounds of growth capital.

The identity of its potential new backers was unclear on Monday.

ChaChing also plans to give consumers the option of donating part of their rebate to charity, with Great Ormond Street Hospital having signed up in this capacity.

It is separately working to provide cash rewards to NHS staff through its intranet, while The Mum Club, a networking platform for mothers, has agreed to promote ChaChing to its members.

Other retail partners are understood to be in the process of being lined up by ChaChing.

"We are very excited to be partnering with ChaChing as we are continually looking for the most efficient and effective way to reach millions of new customers," Dan Finley, chief executive of Debenhams, said.

"We want to be at the forefront of innovation in our industry, hence why we are a launch partner with ChaChing."