I'd love to run a card loyalty program. I would gamify the **** out of it.
EG:
Let me automatically apply 1% to any transaction and receive double points
Spend $xx_ in 5 countries each year and receive xx_
Receive trailing commission on member get member referrals
Auto approve customers for new credit products if they opt in
Gamify spending on debit products
And a billion other things that are now coming to mind...
I seriously don't understand why the small minded people at banks think that cutting rewards is the answer to sustaining/increasing profitability. It's a cheap way out of a problem that has more profitable solutions when a little work is put into dreaming up how to fix it.
For example - Banks make a ****load of cash off card customers through data. Do know banks sell your (sometimes anonymzied) data for profit, and you pay for the privilege? There was a banking start-up some years ago that tried to give this a whirl.. Raised ~$15M, got hacked and lost consumer trust. There's a heap of innovative people out there I only wish corporates would tap into this resource. They clearly need it.
Rewarding consumers through points is a wave that has come and is now plateauing. Time for the next big thing.
I have to jump in on this.
As much as you would like to think that banks make a squilliion dollars out of you with your points earning card, I can assure you that from a product perspective in Australia they do not. The deals the banks have with Amex have very little in it for the banks except for the revolve on the balance if you choose to and a share of the annual fee (which is usually waived). Amex issue the card and pay QF for the points. The bank provides the credit. Qantas have a virtual monopoly on the rewards space.
If you're spending big on your Qantas points earning bank issued card and paying your bill every month then you're breaking even for the bank at best. Theres just not much in it any more hence the lack of any new entrants to the market and the struggle that Apple pay is having with the banks and entering the market.
With your Visa/Mastercard Qantas charge the banks based on card spend. At the moment that number is 1% for 1 point and heading North. Qantas then pay the points to the bank.
Yes, Qantas take 1% of your card spend for 1 point.
Qantas know exactly what they are doing with this market and are manipulating it perfectly however they may have played it too hard now that the RBA has clamped down on interchange now.
As you all know, Interchange revenue is going South quickly. The RBA want wholesale average weighted interchange to be 0.30% with a view to getting to zero for scheme and Amex issued bank cards. The number today is supposed to be 0.50% however its around 0.63% in reality. The RBA has been very patient over the last 10 years or more but that patience is running out
The other problem for banks with big spenders such as yourselves is that you don't revolve a balance at 20% plus. The bank has to allocate the capital for your limit which you don't use and that costs them money as they can't lend that to anyone else and they are giving it to you instead - for free.
As much as we all think that we are valuable customers, in this market unless you're revolving your balance and utilising most of your limit (70% at least), spending overseas a lot (International interchange is around 2%) and generally not paying your bill on time and paying your annual fee, making ATM withdrawals and cash advances your value to the bank is marginal if you're after qantas points.
With that environment the banks are left with 2 choices now.
1) Increase ancillary fees (annual fees, FX fee, late fee, revolve %) - Citibank have done this. 3.4% FX is highway robbery IMHO
2) Decrease costs of which the main one is QFF points - hence the points capping and reductions
As we head towards a lower and possibly zero interchange environment, Amex (non bank) cards and Diners Club will be the only option for QFF points.
This reality is very close.
I know that there will be many among you who will not accept my post which is your prerogative, however when you break down the numbers, QFF cards are not a the money making machine that you think. Put simply;
Spend $100 at a Merchant
Interchanged earned $1.30 (Visa Rewards Rate - Black card)
QFF points paid away $1.00 (1 QFF point per dollar)
Transaction costs $0.10
This leaves us with $0.20 to play with. We have to run a business with this.
