Credit card managers and consumers need to keep an eye on regulatory developments and market trends abroad because the payments business operates as a global network. Australia is a perfect example, as are the Canadian and European markets. With a population of about 28 million—closer in size to Texas (32 million) than Florida (24 million)—Australia is a relatively small market. Its regulators, however, wield outsized influence and are highly focused on cost-accounting models rather than business strategy.
Buy now, pay later (BNPL) is a good example. Australia didn’t invent BNPL, but it is where the model reached its tipping point. The country also adopted EMV chip technology nearly a decade before the United States. And when it comes to credit and debit interchange, the Reserve Bank of Australia (RBA) pioneered regulatory price controls years before the Dodd-Frank reshaped U.S. debit interchange.
Today’s read examines how several leading Australian card issuers are reducing credit card rewards as they prepare for another round of regulatory pressure.
What’s Happening
The RBA is banning card surcharges while reducing interchange rates yet again. The rationale is rooted in cost-accounting models that claim interchange is no longer aligned with underlying revenue dynamics. To offset the expected revenue loss, ANZ is slashing the reward model for the Qantas card. According to the report:
- ANZ is reducing the bonus Qantas Points offers on two of its most popular credit cards.
- Effective immediately, the bonus Qantas Points offer on the ANZ Frequent Flyer Black is now 80,000 points, down from 130,000.
- The bonus Qantas Points offer on the ANZ Frequent Flyer Platinum has been slashed from 75,000 points to 40,000 points.
- Annual fees for both cards remain the same, but the $200 cashback on the Black card and the $100 cashback on the Platinum have been removed too. This effectively makes the cards more expensive without raising fees.
Canary in the Coal Mine?
ANZ is a well-run card issuer, and we highlight it because it is a major domestic bank with a successful airline co-brand partnership. This is very early in the regulatory reaction cycle, so expect other Australian issuers to follow with similar changes.
A recent Javelin report, Rewiring the Credit Card Value Proposition: From Best Card to Best Relationship, discussed how three issuers are contending with the boiling issue of credit card pricing. We explained how Bank of America, Capital One, and Chase are engineering their card strategies to drive value beyond just points-per-dollar.
Keep a close eye on what happens down under. If your institution is not already executing a similar strategy, there is a good chance you will be following the AU playbook within the next business quarters—or perhaps even sooner.