Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016
Nutcase - thanks for your replies, always insightful.
How do you think non QFF rewards cards (bank issued MC/Visa) will end up in the wash? - flexible point program cards that don't operate via 1% of spend for monthly sweep of points (or maybe they do?).
If QFF moves to 0.5PPD at best per $1 spend (assuming QFF dont devalue currency) should we expect similar from flexible point cards?
Thanks - I know that I can be quite controversial and polarising at times.
The prevailing opinion in the card industry is that, not withstanding the devaluation of rewards programs, the reduction of interchange will drive a different kind of competition and innovation.
Assuming that Qantas continue to charge the same amount for points then you can assume the following.
1) Banks will ditch their AMEX companion cards. There will be no benefit for having them and the schemes (Visa and MCW) will make this financially attractive for the banks to do so. Visa and MCW have very deep pockets and the big 4 are on the boards of both organisations. This will also drive down the banks costs. What happens to the annual fee is anyones guess but I wouldnt pay $400 per year for a card that earns 0.5 points per $1
2) Banks will use the changes to rationalise their card fleets. Expect only 2 kinds of cards. Standard and Super premium Thats it. Rewards (if any) on Super premium and nothing on standard. Many Banks wont even bother with rewards.
3) The Maximum amount of points to expect would be 0.5/$ will be the new normal. BWA currently have 0.66/$ on their super premium world card but it cant last. The numbers don't stack up.
4) Qantas will have to change its domestic point earn on its pre paid (coughpy) card as it will be reclassified as a debit card with a $0.12 interchange. Expect zero points on domestic spend or something like the BWA QFF debit at 5 points per transaction.
5) Expect reduced interest free days. 44 days will be the new normal
6) Non FF benefits will be expanded so expect to see insurance, overseas fee changes etc. Keep in mind that when your card is used overseas, no matter if its a debit, gold or platinum it is classified as "overseas" and attracts a higher interchange of around 2%. Overseas spend is not a huge amount compared with domestic. Less that 10% in fact. Banks will need to get creative with how to give benefits at low costs.
7) AMEX will go nuts getting in on the act and will own the rewards market however they will be under pressure as banks move to "interchange plus" pricing for merchants which will make things very challenging for AMEX.
8) I would get a Diners/MCW combination right now.
9) Merchants will hate AMEX even more. The transparency in pricing will be even more stark.
10) Non FF rewards? Mastercard own Pinpoint who basically own this space. Non FF rewards will become increasingly irrelevant and many banks wont bother.
11) Other Airlines? Maybe but who will blink first and reduce the amount they charge for points? Thats the problem. There is so little to play with 0.80% is the maximum and 0.50% is the wholesale weighted average. The RBA wanted 0.00% and were prepared to compromise to 0.30%. This isn't over yet.
I hope this answers your questions.
