With 1 July 2017 fast approaching, we’ve been gearing our customers up for new Mastercard and Visa credit card interchange rates. There are some that will come out victors and others that stand to lose when the changes come into effect. So who are the winners and losers of the new RBA regulations, and what can you do to make sure you come out on top?
Up until now, Mastercard and Visa credit card interchange fees have ranged up to 2.2 per cent. But as a result of the new cap of 0.8%, banks which issue credit cards are going to see significantly lower revenues. Many — including all of the big four — have already begun to compensate by reducing perks and rebates. The verdict? Banks are set at a disadvantage from interchange caps and see significant reduction in their revenues.
Rate caps mean card use is about to explode, especially for B2B card usage and payments. This leaves the door wide open for fintech startups to break in and innovate. With an increased demand for solutions that reduce B2B payments friction, businesses which build advances in payment technology and increase digitisation are prime for growth. Fintechs have much to gain from this democratisation of card use, and we’re looking forward to seeing how they rise to the occasion.
Because banks are looking at new ways to cut down on the overheads of managing card payments, there’s already been a marginal reduction to reward benefits, in addition to fee hikes. Decreased point-earning rates and more restrictive rewards caps mean Aussie points junkies are definitely going to be in the losing category. Basically, unless you’re willing to use AmEx and possible incur a 2% + surcharge, you won’t reap the same high-end rewards benefits after 1 July.
Businesses which receive payments
Interchange is a cost that is paid for by businesses which accept cards as a form of payment. After July 1, these costs will fall by between 50-60%. This is a direct benefit to the bottom line of card accepting businesses and will result in an increase in the number of businesses that accept card payments — as well as a decrease in the surcharges that these businesses levy on their customers. As a result, we will see growth in B2B payments.
Businesses which make payments
Right now, relatively few businesses use their commercial cards to pay suppliers because of high interchange rates. With this roadblock removed, credit cards instantly become some of the most powerful tools available to businesses. Business owners can start to harness the supplier payment potential of credit cards and access up to 55 payment free days of working capital.
From where we’re sitting, business owners are the clearest winners of interchange caps. Credit cards — something we all already have in our back pockets — suddenly become one of the most viable funding options for Australian businesses.