The new structure of credit card interchange fees is expected to hit the banks in the hip pocket much sooner and with more force than expected.
Already credit card businesses owned by the big banks have started to decline, with smaller players wasting no time in offering consumers more attractive products.
According to the Australian Financial Review, “the biggest challenge to the credit card industry is fragmentation of the market and the entrance of niche players who are picking off profitable customers.”
According to a report by McLean Roche Consulting Group, the most pressure is placed on institutions with expensive loyalty programs.
“It is most unlikely that Australian consumers will continue their high use of credit cards as transaction vehicles,” the report said.
“Expect reduced spend and lower card numbers as cardholders rationalise their cards. The banks will face a torrid 12 months as they fight higher costs, reduction of card numbers and reduced spending,” the report stated.
