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

[Isochronous]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Not to mention we are now seeing competition emerge from UnionPay.

 

[Deleted member 29185]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

If businesses can make money off people who are uninformed, by choice or otherwise, it is far from the government's role (nor a supposedly independent monetary governance institution's role) to regulate.

I don't agree. I think it's a fine line that has to be walked by gov't (one they frequently struggle with), but I do believe it is part of a gov'ts role to protect people against rip-off merchants and not so salubrious business practices, and they can be door to door salespeople right up to corporate leviathans.

There are lots of examples of where Gov't regulation protect us from cons........and a con may not necessarily be illegal. When it come to money handling, not everyone understands the vast array of products available, nor how much they will cost. Just because a business can make money out of those people, doesn't mean they should be permitted to. Anyone can make money by heading to the local servo and holding them up......but that does not translate into meaning that they should, oh and I do believe there is Gov't regulation to restrict that kind of behaviour.

What about those side show retailers that flog overpriced show bags. The trinkets in them are flat out lasting a child until days end before they're stuffed and thrown in the bin. Should these dodgy "cheap" toys (aka future landfill) be permitted? Obviously they are, but I think they should be controlled simply because even though a business can turn a quick buck with them, they do not have the right to slowly kill the planet with junk that is a waste of natural resources to produce, a waste of energy to produce, a waste of energy to dispose of and a toxin to the environment in the long term. A business model based on making money at any cost is not a good thing and unfortunately, that kind of mentality does exist in some business leaders (certainly not in all businesses) and it does need overarching control from time to time when these corporate thugs start to get out of control.

I've also run my own business for the last 30 plus years and I view Gov't regulation as a necessary evil that has to be managed and even at times disagreed with, but it's far better like that than some of the alternatives on offer.

 

[newcomic]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

What I find interesting is that the Big Banks haven't really moved yet on their Rewards constructs. I find it unlikely they are just going to take the P&L hit. thoughts?

 

[Doctore1003]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

What I find interesting is that the Big Banks haven't really moved yet on their Rewards constructs. I find it unlikely they are just going to take the P&L hit. thoughts?

I'm sure they've got plans for what they'll do when the changes are announced, but for now they may as well keep the party going. The RBA has signalled its intent but it hasn't formally decided yet... I think the decisions is due by May? If so, then it would likely take effect in late 2016.

I think it's almost certain banks won't simply absorb the p&l hit and instead we'll see an erosion in card earn rates (moreso at the premium end).

 

[Deleted member 29185]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

banks won't simply absorb the p&l hit and instead we'll see an erosion in card earn rates (moreso at the premium end).

That'll be an interesting scenario. Who will pay the fees for these premium cards, if there are little or no added benefits (all benefits have to be paid for somehow)? I know for sure that I wouldn't pay the silly annual fee to get a card that had nothing going for it except of shiny platinum or black colour and some perceived (by very few) indication of personal social status!

 

[newcomic]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

That'll be an interesting scenario. Who will pay the fees for these premium cards, if there are little or no added benefits (all benefits have to be paid for somehow)? I know for sure that I wouldn't pay the silly annual fee to get a card that had nothing going for it except of shiny platinum or black colour and some perceived (by very few) indication of personal social status!

The RBA has pretty much decided what it wants to do. There is of course an 'industry consultation' period, but their recommendations are very unlikely to change. We will definitely see a reduction in earn rates at the premium end of the market. I'm glad I signed up for my Amex proprietary when I did. Also the bonus 80k points was a treat

 

[Deleted member 29185]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

The RBA has pretty much decided what it wants to do. There is of course an 'industry consultation' period, but their recommendations are very unlikely to change. We will definitely see a reduction in earn rates at the premium end of the market. I'm glad I signed up for my Amex proprietary when I did. Also the bonus 80k points was a treat

I wasn't referring to the RBA decision nor it's likely effect, but rather the statement that the premium end of the card market will be hardest hit. I wasn't even disagreeing with the statement, I was just making comment that the premium cards will become close to worthless if they're hit hardest (perhaps even making them extinct). I think the banks have for years used Struggle Street to subsidise attraction sweeteners for their "more desirable" clients and to be honest, I can't see that changing into the future.

 

[Doctore1003]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

I wasn't referring to the RBA decision nor it's likely effect, but rather the statement that the premium end of the card market will be hardest hit. I wasn't even disagreeing with the statement, I was just making comment that the premium cards will become close to worthless if they're hit hardest (perhaps even making them extinct). I think the banks have for years used Struggle Street to subsidise attraction sweeteners for their "more desirable" clients and to be honest, I can't see that changing into the future.

I don't think premium cards will be hit so hard as to become close to worthless. We may come down to 0.5 - 0.75 points per $ on cards that are currently earning 1 or 1.5 pts / $ amongst the banks. Citibank and affiliates seem to be the first cab off the ranks with the recent halving of earn rates.

 

[newcomic]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

You're probably correct. With the cap of 80bps, Super Premium will be hit pretty hard. All things being equal, you'd have to assume the max interchange earned on a Super Premium would be 80bps (down from 137.5bps on Visa Signature like an ANZ Black or 220bps on Citi's Visa Infinite or down from 122bps on MasterCard Super Premium like Westpac Altitude Black).

A quick calc, assuming everything else stays the same, we're talking a drop of 40% in interchange revenue for ANZ's Black as an example or worse yet if you're Citibank).

It's so interesting. Since reading that website i've done a lot more reading myself. It's a really interesting issue, particularly given Amex Proprietary seems to be unaffected, which is astounding.

 

[ragingsheep]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

It's a really interesting issue, particularly given Amex Proprietary seems to be unaffected, which is astounding.

It's because Amex, unlike Visa and MasterCard, isn't seen as a "must accept" product. It's only got about ~20% market share and that's including the popular companion card offerings which is being regulated out of existence.

Past experience has also been that interchange on Amex has fallen (though maybe not 1:1) as interchange on Visa and MC has fallen too.

 

[newcomic]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

It's only got 20% now. Will be interesting to see how this evolves when high spenders realise their points earn is shot and migrate to proprietary.

It's because Amex, unlike Visa and MasterCard, isn't seen as a "must accept" product. It's only got about ~20% market share and that's including the popular companion card offerings which is being regulated out of existence.

Past experience has also been that interchange on Amex has fallen (though maybe not 1:1) as interchange on Visa and MC has fallen too.

 

[Radio8tiv]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

It's only got 20% now. Will be interesting to see how this evolves when high spenders realise their points earn is shot and migrate to proprietary.

This would be good news for Amex if it is truly the case, their share prices have certainly taken a beating in the past few days after their low earnings announcement

 

[albyd]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Assuming Amex proprietary remains unregulated I'm assuming that "market forces" will mean they will need to cut their fees somewhat as MasterCard & Visa will be even cheaper to accept (assuming these fees are reflected in lower merchant fees).
Probably won't make much difference to us as consumers although our Amex cards will attract a higher incidence of surcharges.

 

[aussieboozer]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

as MasterCard & Visa will be even cheaper to accept (assuming these fees are reflected in lower merchant fees).

You are kidding aren't you? Banks actually passing on cost reductions!

 

[CaptJCool]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Because of the process, it's merchants who take the "windfall" gain, after all they are the ones who have copped the loss to now. Let's face it, it's been systematic overcharging fee for service whose real cost was never and even now nothing like they charge. Result; profit transfer from banks to businesses

 

[aussieboozer]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Because of the process, it's merchants who take the "windfall" gain, after all they are the ones who have copped the loss to now. Let's face it, it's been systematic overcharging fee for service whose real cost was never and even now nothing like they charge. Result; profit transfer from banks to businesses

I work for a non-profit and we are charged 1.2% on Visa/MC. Happy to post when we get a reduction but I won't hold my breath.

 

[CaptJCool]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

You may want to wonder why you're charged anything ?

Interchange rates | MasterCard®

 

[ragingsheep]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

This would be good news for Amex if it is truly the case, their share prices have certainly taken a beating in the past few days after their low earnings announcement

TBH, I'd be surprised if more than 1/3 of current companion cardholders move to Amex prop. People might complain but at the end of the day, the added hassle of two separate accounts, the annual fees and plain old inertia is just going to put people off.

You are kidding aren't you? Banks actually passing on cost reductions!

Well yes they have been. http://www.rba.gov.au/statistics/tables/xls/c03hist.xls

Because of the process, it's merchants who take the "windfall" gain, after all they are the ones who have copped the loss to now. Let's face it, it's been systematic overcharging fee for service whose real cost was never and even now nothing like they charge. Result; profit transfer from banks to businesses

Which is why now there's more of an effort to allow merchants to only surcharge an amount equivalent to their cost of acceptance and for the first time, there's actually a regulatory body assigned to supervise surcharging.

 

[exceladdict]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

I work for a non-profit and we are charged 1.2% on Visa/MC. Happy to post when we get a reduction but I won't hold my breath.

You may want to wonder why you're charged anything ?

Interchange rates | MasterCard®

Thats the wholesale, most NFPs still pay fees to payment processor and/or banks

 

[albyd]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

You are kidding aren't you? Banks actually passing on cost reductions!

I'm assuming they will have to pass at least some of the savings to merchants to some extent as that's why the rewards banks give us are being reduced as they're getting paid less.

As for merchants, not likely they will pass on any "savings" to us consumers which was the point of the RBA "reforms".