Will your perks survive? What the RBA’s crackdown really means for credit cards and Apple Pay
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If you’ve been following the news lately, you might have seen some alarming headlines about the Reserve Bank of Australia (RBA) and its latest proposals for credit card payments.
Words like 'ban,' 'cap,' and 'cutbacks' have been thrown around, leaving many Aussies—especially those of us who love a good frequent flyer point or the convenience of Apple Pay—wondering: are our beloved credit card perks and digital wallets about to disappear?
Let’s take a closer look at what’s really going on, what the experts are saying, and what it could mean for your wallet.
A payments specialist has downplayed concerns that the Reserve Bank’s plan to scrap card surcharges and introduce a cap on interchange fees will lead banks to axe credit card perks like frequent flyer points.
The RBA’s consultation paper floats the idea of capping the highest interchange fees that banks and service providers can charge on card transactions. It argues that the fees businesses currently pay to card networks are ‘too high’.
These fees make up a big slice of revenue for banks and card issuers and help fund perks like frequent flyer programs.
And Aussies do love their rewards—Qantas says over a third of credit card spending here is on cards that rack up its points.
The RBA itself warned that rewards schemes could take a hit if interchange fees are capped, potentially slashing revenue by close to $1 billion.
Notably, American Express credit cards aren’t covered by the RBA and won’t be affected.
‘Issuers are expected to experience a reduction in interchange revenue of around $900 million under the preferred package and $800 million under the alternate option,’ the paper reads.
‘Some issuers may choose to increase cardholder fees or reduce benefits such as rewards points, particularly on credit cards, to boost their profitability in response to reductions in interchange settings,’ it continues.
But according to Payment Services managing director Brad Kelly, the interchange fee is the ‘holy grail’ for banks. He admitted the cap might ripple through to consumers but doesn’t reckon it’ll spell the end of popular perks like Qantas points.
‘What it will mean is that revenue bucket is just not big enough anymore to pay for rewards, so they're going to have to work out a different way to pay for it,’ Kelly told 9news.com.au.
‘Potentially what will happen is that rewards cards will evolve. It's not the end of frequent flyer points on rewards cards. Far from it.’
He suggested we might start seeing rewards points dished out by merchants instead – which could ramp up competition and lead to better deals for punters.
‘The customer could be better off,’ Kelly said. ‘I also think there's opportunity for alternatives, where you still get your rewards per spend, but it's handled differently.’
Money-saving expert Joel Gibson echoed the idea that people shouldn’t stress over losing rewards – though he flagged that other features, like fraud protection, might suffer instead.
‘Reducing fraud protection would be a serious downside, for example,’ he said. ‘But reducing the value of rewards programs would probably leave most people better off in my view.’
According to Gibson, Aussies tend to overestimate the value of their rewards. With the average credit limit sitting at $10,439, scoring a business-class ticket just on points might be a stretch.
‘Most of us pay more in annual fees, merchant fees and interest than we get back in points, even if we don't realise it,’ he said. ‘And most of us have no idea what a point is worth and the rewards programs make it hard to work out by giving them different values for different purchases.’
None of the big banks approached by 9news.com.au confirmed if they’re considering cutting perks in light of the RBA’s proposed changes.
Meanwhile, it’s been suggested that Apple Pay could be on the chopping block if the surcharge ban goes ahead. The Australian Financial Review recently reported that at least one major bank is weighing up ditching Apple Pay.
But Kelly reckons that’s unlikely, saying, ‘Apple Pay now represents about 40 per cent of card payments in Australia. There’s no way [a bank] would switch off 40 per cent of its payment traffic.’
The RBA’s feedback window is open until August 26, and reforms are expected to kick in next July. Some business owners have warned that if surcharges are scrapped, those costs might be passed on to customers instead.
The RBA is also pushing for more transparency, proposing that providers clearly show their wholesale fee structures.
Read more: Reserve Bank moves to end debit and credit card surcharges and cap fees for businesses
Are you a frequent flyer points collector? Do you rely on Apple Pay for your daily shopping? Have you ever felt stung by card surcharges or confused by your rewards program? We’d love to hear your thoughts and experiences. Share your stories in the comments below!
Words like 'ban,' 'cap,' and 'cutbacks' have been thrown around, leaving many Aussies—especially those of us who love a good frequent flyer point or the convenience of Apple Pay—wondering: are our beloved credit card perks and digital wallets about to disappear?
Let’s take a closer look at what’s really going on, what the experts are saying, and what it could mean for your wallet.
A payments specialist has downplayed concerns that the Reserve Bank’s plan to scrap card surcharges and introduce a cap on interchange fees will lead banks to axe credit card perks like frequent flyer points.
The RBA’s consultation paper floats the idea of capping the highest interchange fees that banks and service providers can charge on card transactions. It argues that the fees businesses currently pay to card networks are ‘too high’.
These fees make up a big slice of revenue for banks and card issuers and help fund perks like frequent flyer programs.
And Aussies do love their rewards—Qantas says over a third of credit card spending here is on cards that rack up its points.
Experts have played down fears that the RBA’s proposed ban on card surcharges and cap on interchange fees will lead to Aussies losing popular credit card perks like frequent flyer points. Image source: Blake Wisz / Unsplash. Disclaimer: This is a stock image used for illustrative purposes only and does not depict the actual person, item, or event described.
The RBA itself warned that rewards schemes could take a hit if interchange fees are capped, potentially slashing revenue by close to $1 billion.
Notably, American Express credit cards aren’t covered by the RBA and won’t be affected.
‘Issuers are expected to experience a reduction in interchange revenue of around $900 million under the preferred package and $800 million under the alternate option,’ the paper reads.
‘Some issuers may choose to increase cardholder fees or reduce benefits such as rewards points, particularly on credit cards, to boost their profitability in response to reductions in interchange settings,’ it continues.
But according to Payment Services managing director Brad Kelly, the interchange fee is the ‘holy grail’ for banks. He admitted the cap might ripple through to consumers but doesn’t reckon it’ll spell the end of popular perks like Qantas points.
‘What it will mean is that revenue bucket is just not big enough anymore to pay for rewards, so they're going to have to work out a different way to pay for it,’ Kelly told 9news.com.au.
‘Potentially what will happen is that rewards cards will evolve. It's not the end of frequent flyer points on rewards cards. Far from it.’
He suggested we might start seeing rewards points dished out by merchants instead – which could ramp up competition and lead to better deals for punters.
While the RBA warns banks could reduce rewards programs or increase fees to offset lost revenue, experts say rewards cards may evolve, with perks possibly being offered through merchants instead. Image source: Michael Lima / Unsplash. Disclaimer: This is a stock image used for illustrative purposes only and does not depict the actual person, item, or event described.
‘The customer could be better off,’ Kelly said. ‘I also think there's opportunity for alternatives, where you still get your rewards per spend, but it's handled differently.’
Money-saving expert Joel Gibson echoed the idea that people shouldn’t stress over losing rewards – though he flagged that other features, like fraud protection, might suffer instead.
‘Reducing fraud protection would be a serious downside, for example,’ he said. ‘But reducing the value of rewards programs would probably leave most people better off in my view.’
According to Gibson, Aussies tend to overestimate the value of their rewards. With the average credit limit sitting at $10,439, scoring a business-class ticket just on points might be a stretch.
‘Most of us pay more in annual fees, merchant fees and interest than we get back in points, even if we don't realise it,’ he said. ‘And most of us have no idea what a point is worth and the rewards programs make it hard to work out by giving them different values for different purchases.’
None of the big banks approached by 9news.com.au confirmed if they’re considering cutting perks in light of the RBA’s proposed changes.
Meanwhile, it’s been suggested that Apple Pay could be on the chopping block if the surcharge ban goes ahead. The Australian Financial Review recently reported that at least one major bank is weighing up ditching Apple Pay.
But Kelly reckons that’s unlikely, saying, ‘Apple Pay now represents about 40 per cent of card payments in Australia. There’s no way [a bank] would switch off 40 per cent of its payment traffic.’
The RBA’s feedback window is open until August 26, and reforms are expected to kick in next July. Some business owners have warned that if surcharges are scrapped, those costs might be passed on to customers instead.
The RBA is also pushing for more transparency, proposing that providers clearly show their wholesale fee structures.
Read more: Reserve Bank moves to end debit and credit card surcharges and cap fees for businesses
Are you a frequent flyer points collector? Do you rely on Apple Pay for your daily shopping? Have you ever felt stung by card surcharges or confused by your rewards program? We’d love to hear your thoughts and experiences. Share your stories in the comments below!
