Australia and New Zealand Bank says that it will be forced to revisit cardholder loyalty programmes as it seeks to recoup an estimated A$40 million shortfall in credit card profits caused by rising costs and recently-mandated cuts in interchange fees.
ANZ's statement follows yesterdays announcement by the Reserve Bank of Australia that banks must cut credit card interchange fees by 40%, from current highs of 0.95% for each transaction to a maximum of six basis points.
ANZ claims that the impact of reductions in interchange revenue and recent increases in the cost of frequent flyer points are likely to reduce its credit card annual after tax profit by approximately $40 million by the 2004 financial year.
The banks says the competitive environment means that it will be forced to absorb one-third of the profit shortfall itself, rather than passing on costs to cardholders.
ANZ managing director consumer finance Brian Hartzer says the Reserve Bank's proposals set Australian interchange levels well below those in other developed markets.
"The reduction in interchange announced by the Reserve Bank was disappointing but now a reality," he says. "Credit card programmes are already under pressure from recent increases in the cost of frequent flyer points and the other costs of reward schemes."
He says the bank will be forced to look again at the price/performance of customer loyalty programmes and other cardholder incentive schemes.