Signature points now capped at $20K per "Statement", 1½ PP$ International

[Jeffrey O'Neill]

The problem with this, I suspect in the very near future, is that AmEx cannot continue to charge 2% MSF when scheme credit cards are forced down to 0.5%. No merchant is going to put up with this. AmEx holders (me) would either get kick out of the store, or forced to pay a surcharge to cover the points we want.

Back to square one.

For myself, since I buy miles in various programs as my CC spend isn't particularly high, I'm Ok with paying say 1 to 2c per mile in surcharge fees as that's still cheaper than buying miles in most reward schemes.

 

[trippin_the_rift]

Time to innovative!

How? When the RBA is forcing your profit from 2.x % to 0.5% by regulation, your hands are tied.

Innovation is my middle name. I show companies the path to new revenues through commercial innovations every other day.

Australia isn't the first country to have regulation pushed down it's throat. EU is there and UK isn't too far behind.
In fact an airline industry magazine asked the same question of me this past week for an interview and the solution won't be in interchange fees but is secretly hiding in another product line where margins are high and the customer focus can be shifted from one area to another. While I can't give out the answers for free in such a public forum; banks will come out of any potential changes stronger once they discover the new holy grail. It's naive to think banks don't have a backup plan when interchange fees have been on the radar for many years all around the world.

 

[Nutcase]

On the subject of innovation. Eftpos has become largely irrelevant and hasn't been able to afford to keep up with the card schemes technology (contactless, chip, not to mention ability to use it online). Even if it implements chip and contactless, it's now well and truly on the backfoot and won't be able to recover lost market share. I imagine part of the reason the banks have been loathe to invest in it is that it doesn't make any money (I'm assuming a flat fee for processing eftpos transactions, particularly after network running costs are paid for doesn't leave much for the banks) whereas the international card schemes and AMEX have the resources to innovate.

It's one thing wanting near zero cost of handling payments but someone has to pay for maintaining and developing the system. Banks aren't charities, they're not going to do it for free.

EFTPOS (EPAL - EFTPOS Australia Limited) is a business predicated on consumer ignorance. Its now run by a guy who's a former VISA executive. The RBA wants EPAL to succeed in order to drive the cost of processing down however its widely accepted that its probably too late. Keep in mind that EPAL also has ATM's running on its network.

Consumers dont realise that Pressing CHQ/SAV sends the transition to the EPAL hub and pressing CR sends the transaction to the schemes/AMEX/DC.

Big problem now - 70% of card transactions are contactless and that defaults to CR.

EPAL is artificially kept alive by Coles and Woolworths given their sheer volume. Notice this especially at check outs when you're offered cash out. If you choose that option and use a debit master card then it defaults to CHQ/SAV and denies CR. Visa debit allows cash out through CR. Supermarkets love this.

EPAL have spent a lot of money on their new eHub which will save them a lot of money in the long term. This will also handle ATM traffic as well.

EPAL are well behind on their plans to have Online transactions available and contactless is a big problem as it defaults to Visa/Mastercard

EPAL will always be around but are they are real player? Not really but when interchange hits zero then they will be in the game with a cheaper option for merchants.

 

[Nutcase]

Innovation is my middle name. I show companies the path to new revenues through commercial innovations every other day.

Australia isn't the first country to have regulation pushed down it's throat. EU is there and UK isn't too far behind.
In fact an airline industry magazine asked the same question of me this past week for an interview and the solution won't be in interchange fees but is secretly hiding in another product line where margins are high and the customer focus can be shifted from one area to another. While I can't give out the answers for free in such a public forum; banks will come out of any potential changes stronger once they discover the new holy grail. It's naive to think banks don't have a backup plan when interchange fees have been on the radar for many years all around the world.

To your point - The current game is pretty much over as it stands now and needs an overhaul.

 

[daveozsydney]

To your point - The current game is pretty much over as it stands now and needs an overhaul.

The game has always been changing - there are always ways to benefit from the constant state of flux. Compared to other countries in Europe we're doing pretty well for reward points.
I would be more concerned if the Amex 3pts per $ went at Coles/Woolies/IGA which I assume is not funded by the supermarkets...

Still the majority of people will redeem for economy flights or toasters etc and it's those folk via the merchants who pay for our business and first class redemptions...

 

[Nutcase]

Still the majority of people will redeem for economy flights or toasters etc and it's those folk via the merchants who pay for our business and first class redemptions...

You are indeed correct. This is why the RBA is evangelical about zero interchange and EPAL working. Someone always pays.

 

[daveozsydney]

You are indeed correct. This is why the RBA is evangelical about zero interchange and EPAL working. Someone always pays.

There is also a sense of irony that to to have a really high earning point card to earn more rewards you need to have a high income in the first place when arguably people in this situation don't need the rewards as much as people on low incomes. No equality on earn rate in the points world.. therefore there must be profit if high earners are enticed with higher points per dollars and higher credit limits than the low income qualification cards, or perhaps the risk of default is lower..But that is a philosophical discussion for another time...

 

[trippin_the_rift]

You are indeed correct. This is why the RBA is evangelical about zero interchange and EPAL working. Someone always pays.

What the rewards culture shows is that people are willing to accept the system and pay for it accordingly.

 

[Nutcase]

There is also a sense of irony that to to have a really high earning point card to earn more rewards you need to have a high income in the first place when arguably people in this situation don't need the rewards as much as people on low incomes. No equality on earn rate in the points world.. therefore there must be profit if high earners are enticed with higher points per dollars and higher credit limits than the low income qualification cards, or perhaps the risk of default is lower..But that is a philosophical discussion for another time...

You're sounding like a true socialist. I like that.

The only real profit is if you revolve your balance which few people do in the super premium space. Its why the annual fees are so high and ancillary fees are high as well.

 

[Nutcase]

What the rewards culture shows is that people are willing to accept the system and pay for it accordingly.

Perceived value and something for nothing. Also, the "prestige" of having a black card. A bit like the "Chivas regal effect". The higher the price, the more people want it.

 

[daveozsydney]

You're sounding like a true socialist. I like that.

The only real profit is if you revolve your balance which few people do in the super premium space. Its why the annual fees are so high and ancillary fees are high as well.

Gosh am I -it must be the Christmas effect!

 

[Nutcase]

Gosh am I -it must be the Christmas effect!

I won't tell anyone.

Its clear that you understand the economics of the business which so few people (even those in financial services) actually do. Trying to explain the marginal nature of a business like cards in a highly regulated environment is difficult without some background knowledge or understanding.

I use this quote a lot;

"For every complex problem, there is a solution that is simple, neat, and wrong."
~H.L. Mencken ~