Lower Bank interchange fees to 'enhance' credit card earn rates

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We've seen the start of it with Citi's move in recent weeks following cut in interchange. Same forces will be impacting other issuers. Will be interesting to see impact on Amex now it's covered by regulation. Will likely see bank issued Amex reduced from current 1.5:1.
Hopefully Amex MR can weather it a little better as it's been less generous than the banks so might have more fat.
We've had a good ride, let's enjoy it while it lasts then figure out a new way forward.
 
The enhancements have started....todays statement from Suncorp has a halving in earn rate from 1pt per $1 for the Qantas Platinum card. I think it is Citi Bank backed so could be a sign of things to come. Takes effect 1 May. No 1 for 1 for the first $2,500 or anything like that.
 
No this is a continuation of things. My Citibank card was reduced from 2 to 1 to 1/2 gosh quite sometime ago.
what I didn't realise is the card upgrade from gold to Plat enabled the card company to gouge higher interchange fees from merchants so not only am I given s lower earn rate they get more from each merchant

For example
Interchange rates | MasterCard®
 
Interchange is going down now so some MC and Visa's are going back to 0.5:1, just a matter of time. Citi was first cab off the rank.

Last time it was cut, banks came up with Bank issues AMEX & "Super premium" cards (platinum, black, etc). Will be interesting to see what they come up with so we can keep earning pointy end flights from our everyday spend (I'm in denial that this might all end one day).
 
albyd said:
Interchange is going down now so some MC and Visa's are going back to 0.5:1, just a matter of time. Citi was first cab off the rank.

Last time it was cut, banks came up with Bank issues AMEX & "Super premium" cards (platinum, black, etc). Will be interesting to see what they come up with so we can keep earning pointy end flights from our everyday spend (I'm in denial that this might all end one day).
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Interchange is going to be capped at 0.80% with a wholesale weighted average interchange at 0.50% and a view to going to 0.30% and eventually zero. Super premium cards have tended to be around 2% depending on the scheme which has been funding the points for VISA and MC. AMEX don't pay interchange as they are a closed scheme like Diners Club.

The RBA wants the new interchange rates to also cover bank issued AMEX cards as well. This will be very interesting and I would expect AMEX to fight this very hard.

The main problem is that Qantas charge the banks and AMEX 1% of card spend. With a maximum interchange of 0.80% something will have to give. The situation will be unsustainable.

AMEX issued AMEX cards will be unaffected. Diners should be all over this like a cheap suit but they wont be which is a real shame.
 
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Interchange regulation will lower Visa and MasterCard Points Earn in 2016

I've seen a few articles on here around this, but i just got an email from a blog I signed up to recently called The Points Team who have addressed how we could be impacted by lower interchange rates.

Here is the article. I actually found it quite interesting. They seem to be quite new but have some great content.

http://thepointsteam.com/2016/01/16/why-signing-up-f…d-idea-right-now/
 
Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

newcomic said:
I've seen a few articles on here around this, but i just got an email from a blog I signed up to recently called The Points Team who have addressed how we could be impacted by lower interchange rates.

Here is the article. I actually found it quite interesting. They seem to be quite new but have some great content.

http://thepointsteam.com/2016/01/16/why-signing-up-f…d-idea-right-now/
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Thats a very cogent and well thought out article. Thank you for posting it. Its sums up the situation well.

At 0.80% interchange with Qantas charging the banks and AMEX 1% of spend (at a rate of 1 point per dollar) then you can see that it will be impossible to offer much as far as FF points are concerned for bank issued scheme and AMEX cards.

Theres a number of possible outcomes but I would guess that the schemes will encourage banks to issue Super Premium cards at 0.80% interchange and pay 0.5 points per dollar as a maximum and all other cards will have no rewards program. Citi's prestige card would have to be reduced to 0.5 points per dollar or capped or both.

The bank issued AMEX's will probably disappear all together as the banks don't get anything from that deal except for the revolve on outstanding balances.

The ball is actually in Qanats' court with this and they have already started to move by reducing some redemption rates.

Im sure there are a lot of "deals" being cut at the moment. Realistically Qantas needs to reduce the costs of its points.
 
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Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

It definitely looks like companion Amex will no longer be relevant in the market. Amex is already ramping up their marketing efforts with Apple Pay and some pretty substantial acquisition offers. 2016 will definitely be interesting. I'm glad I got my Qantas and Velocity Amex's
 
Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

newcomic said:
It definitely looks like companion Amex will no longer be relevant in the market. Amex is already ramping up their marketing efforts with Apple Pay and some pretty substantial acquisition offers. 2016 will definitely be interesting. I'm glad I got my Qantas and Velocity Amex's
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Agreed. Good choice.

I am endlessly frustrated that Diners Club can't get its act together. I worked there when they were owned by Ansett and launched the Golden Wing card and the first points scheme. Everyone else followed. The business went nuts overnight and one Xmas DC ran out of money to pay merchants because they misjudged the spend that went through retail by millions of dollars. Collections staff were instructed to call anyone who had a big balance to get the money in even before the statements were due. Merchants were furious at the payment delays but the place was making a fortune. It was securitised soon afterwards to deal with spikes and troughs.

Since Discover/Bank of Montreal and Citi are involved now its gone backwards even further than the post Ansett days.

The Diners/MC product sold here now is actually quite good but poorly supported with the usual issues of acceptance and bad service. If Diners could cut a deal with the banks and Qantas to issue a card and access the merchant base then you would really have some competition.

I can also see some banks walking away from rewards programs all together or just having a simple product run by pinpoint who is now owned by MasterCard anyway.

Oddly, we don't often contemplate Qantas reducing their fees to banks and neither do Qantas. Funny that.
 
Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Did you know that Qantas track the level of expired points which runs its been suggested about 30-35% and that when you die THEY inherit your points balance ?
 
Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

CaptJCool said:
Did you know that Qantas track the level of expired points which runs its been suggested about 30-35% and that when you die THEY inherit your points balance ?
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Qantas holds all the cards in this deal (pardon the pun) and make it look like AMEX, the card schemes and the Banks are the problem. Whilst they are all to blame to some extent I think that points are a form of currency and are not regulated so its no wonder that this is all happening.

Add on top of that a relative lack of competition, a captive audience and our greed and here we are. Essentially Qantas are manipulating the card business in Australia (rewards cards anyway). Its terribly clever of them. The RBA has also said that it doesn't want to be the policeman. Its a bit of a mess to be honest.
 
Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Yes they do
http://www.actuaries.asn.au/Library/Events/FSF/2012/AnalyticsOfLoyalty3BChandlerTubman.pdf. With a very healthy profit margin. See slides 4, 8 and 9. EBIT is around 34%. So I mistakingly thought that was the breakage rate (which is <10%). But the conversion rate on toasted in the Qantas mall sux. As does the foreign exchange rate on Qantas Cash.

lets hope they don't implement a resale system like Ticketmaster resale. Double clip of the same transaction. How beautiful oh they did. It's called Qantas Cash foreign exchange fees. One clip when you transfer out of Aussie dollars and the second clip when you bring the excess back into Aussie dollars
 
Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

CaptJCool said:
Yes they do
http://www.actuaries.asn.au/Library/Events/FSF/2012/AnalyticsOfLoyalty3BChandlerTubman.pdf. With a very healthy profit margin. See slides 4, 8 and 9. EBIT is around 34%. So I mistakingly thought that was the breakage rate (which is <10%). But the conversion rate on toasted in the Qantas mall sux. As does the foreign exchange rate on Qantas Cash.

lets hope they don't implement a resale system like Ticketmaster resale. Double clip of the same transaction. How beautiful oh they did. It's called Qantas Cash foreign exchange fees. One clip when you transfer out of Aussie dollars and the second clip when you bring the excess back into Aussie dollars
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Don't start me on the toxic product that is the Qantas money card!

Its just an interchange grab (Foreign cards earn around 2% on spend overseas), plus the FX spread, plus the ancillary fees, plus the float. Qantas doesnt even have to pay for their FF cards to be made any more and get a clip on all of the above for doing not much except trying to get people to pay through the nose for junk.

OK - rant over. Down off soap box now.

PS - That PPT deck is impressive and very revealing. They do know their stuff but I think now that the RBA is cutting interchange may have gone too hard with the banks and AMEX. Much like Telstra hate Bpay (because they are the biggest user and see that they support the system) the reverse is true with Qantas who have these card issues by the.......
 
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Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Thanks for the links - some good reading there :)

Soooo - I must be the only one on here without a non-companion card AMEX. I have two new credit cards from Nov / Dec 2015. I am thinking it is way too soon to apply for another card. I am assuming AMEX use Veda for their credit checking, does anyone know?
 
Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

ozmatt said:
Thanks for the links - some good reading there :)

Soooo - I must be the only one on here without a non-companion card AMEX. I have two new credit cards from Nov / Dec 2015. I am thinking it is way too soon to apply for another card. I am assuming AMEX use Veda for their credit checking, does anyone know?
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I wouldn't say it is way too soon to apply for another one and you are quite right AMEX do you Veda.

You might find this thread I started interesting .... http://www.australianfrequentflyer....eda-credit-scores-american-express-71195.html
 
Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

I've been doing more reading. It also appears that the 50bps weighted average cap is now going to be including foreign cards as well which will lower the effective weighted average cap.

I.e. if a premium or super premium US cardholder comes to Australia, the interchange applicable on that product will be taken into account when calculating the 50bps weighted average cap; effectively lowering it given Australia's 80bps cap.

It's definitely not looking good for strong Visa/MasterCard rewards cards in 2016!

Definitely get onto an Amex Proprietary. That blog has some sign-up offers, also seen some on here.
 
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