Loya lty, but not as we know it

Travel Bulletin - - TECHNOLOGY - Tim Hughes Vice pres­i­dent of busi­ness de­vel­op­ment, Agoda

The days of high points earn­ing credit cards will end on July 1, 2017, says Tim Hughes, vice pres­i­dent of busi­ness de­vel­op­ment at Agoda, on­line ac­com­mo­da­tion reser­va­tion ser­vice. The Re­serve Bank of Aus­tralia’s de­ci­sion to put a limit on in­ter­change fees is go­ing to have a di­rect im­pact on a con­sumer’s pointsearn­ing ca­pac­ity. “Banks will be re­stricted on how much they can charge in mer­chant fee trans­ac­tions and the con­se­quence of that is the days of mega­points earn­ing credit card ends on the July 1, 2017. It’s go­ing to be a dra­matic re­duc­tion,” Hughes says. Citibank was the first to make a move, ad­vis­ing cus­tomers its credit card re­wards pro­gram would be amended from March next year due to the in­ter­change rate change. Fi­nan­cial ad­vi­sory firm No­van­tas pre­dicts the move will see banks suf­fer a roughly 35% cur­tail­ment in debit in­ter­change fee rev­enues.

I think Aus­tralia is go­ing through one of the most dra­matic trans­for­ma­tions in loy­alty since the in­tro­duc­tion of the first card’ fre­quent flyer

“That’s hun­dreds of mil­lions of dol­lars in fre­quent flyer pur­chases ripped out of the sys­tem, so that is go­ing to change a lot about how con­sumers can earn points.” Hughes is jok­ingly dub­bing the move the “Card­maged­don” – an Ar­maged­don of loy­alty points. “I think Aus­tralia is go­ing through one of the most dra­matic trans­for­ma­tions in loy­alty since the in­tro­duc­tion of the first fre­quent flyer card,” he says. In­ter­change fees come into play when a con­sumer uses a credit card at a store which has a pay­ment sys­tem set up by another bank. An in­ter­change fee is paid from the store’s bank back to the bank that is­sued the credit card. The money raised from in­ter­change fees is used to pay for the fea­tures of the credit card, in­clud­ing the re­ward points. As banks col­lect a smaller cut from trans­ac­tion sur­charges, there will be less money to pur­chase fre­quent flyer points. As the con­sumer’s abil­ity to earn points eas­ily through reg­u­lar day-to-day trans­ac­tions such as pay­ing a bill de­creases, Hughes says con­sumers will no longer be able to sit back and let their credit card do the work. He pre­dicts it will shift the bal­ance back be­tween points and prod­uct and more of an em­pha­sis will be placed on the qual­ity of the items or ser­vices be­ing pur­chased. “You’re not go­ing to buy a prod­uct 100% just be­cause of points and you’re not go­ing to aban­don points just for a prod­uct,” Hughes ex­plains. As points be­come harder to come by, Hughes says con­sumers will need to find dif­fer­ent ways to earn points, likely by se­lect­ing par­tic­u­lar ven­dors and stores. Agoda has re­cently part­nered with 32 pro­grams on Points­max, which al­lows users to earn points to­ward their favourite loy­alty pro­gram for ev­ery book­ing made through the web­site. Loy­alty pro­grams for which points can be earned in­clude Ve­loc­ity Fre­quent Flyer, Eti­had Guest, Hawai­ian Air­lines, Delta Skymiles, Amer­i­can Air­lines Aad­van­tage and more. The other el­e­ment driv­ing the trans­for­ma­tion of loy­alty is the in­ten­si­fi­ca­tion of the bat­tle amongst the su­per­mar­kets and their af­fil­i­a­tion to fre­quent flyer pro­grams. “That bat­tle has di­vided along very clear lines, with Qan­tas and Wool­worths on one side and Coles/fly­buys and Ve­loc­ity on the other,” Hughes says. “This bat­tle­ground is go­ing to dom­i­nate the loy­alty scheme for the next few years to come, I think you’re go­ing to see enor­mous amounts of TV ad­ver­tis­ing and I ex­pect to see all sorts of in-store ac­tiv­ity as the world is di­vided along those two lines.” Look­ing into his crys­tal ball, Hughes fore­casts banks will be forced to come up with new pro­grams, air­lines will think about new part­ner­ships and he would like to be­lieve loy­alty would be seen to be more about the con­sump­tion and re­la­tion­ship with the prod­uct and less about the mar­ket­ing chan­nel a con­sumer came to. “This Card­maged­don is go­ing to change a lot.”

Tim Hughes

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