New research from American Express reveals that three quarters (73 per cent) of SMEs* have limited understanding of the potential impact of new regulations set to shake up the credit card rewards landscape in Australia.
Card payment regulation announced by the Reserve Bank of Australia last year is due to come into force from July and will cap the fee that Visa, MasterCard and bank issued American Express cards charge businesses for each transaction to a maximum of 0.8 per cent and an overall weighted average of 0.5 per cent. Cards that American Express issue directly are not, however, impacted by the new rules.
These interchange fees, as they are more commonly known, are used by card schemes to largely fund rewards on credit cards, which are subsequently earnt by thousands of SMEs and can be redeemed for a range of benefits from travel to entertainment and even paying off card bills.
According to the recently commissioned research1, 77 per cent of SMEs use credit card rewards points for business purposes where booking business travel, upgrading flights and buying gift cards were the most popular ways in which rewards points were used. When it came to redemption of reward points, on average, over a quarter (27 per cent) of SMEs redeemed over $5000 worth of points each in the last 12 months.*
Martin Seward, Vice President for Small & Medium Enterprises at American Express, said “Our research** tells us that almost two thirds (62 per cent) of businesses would review and consider changing their card options if the rewards points program was devalued. My concern is that knowledge about this likely impact of card payment regulations amongst SMEs is extremely limited.”
Seward added, “We have already seen credit card issuers begin to make changes to their programs, such as reducing earn rates and redemption flexibility offered to card customers. Businesses may see further devaluation by credit card issuers of their rewards programs in the coming months in response to the regulations. Now is the time for SMEs to review the cards to ensure they are getting the best value from their business.”
Other key findings from the research include:
- Business value: Increased staff satisfaction (39 per cent) and reduced business travel costs (38 per cent) were the top benefits that Australian businesses claimed from using reward points.*
- Rewards reputation: Almost two thirds of SMEs stated they were likely to recommend their rewards program to another business owner. If the value of a rewards program was reduced, 68 per cent of businesses agreed they would be less likely to recommend the program to another business.*
- Low awareness of regulation changes: Over 50 per cent (51%) of SMEs were unaware of the upcoming regulation altogether.*
- The value of redemptions: On average, over a quarter (27 per cent) of SMEs with a business rewards card redeemed over $5,000 worth of points in the last 12 months.*
* This research was commissioned by American Express and undertaken by RFi Group in December 2016. The research surveyed key financial decision makers in over 350 businesses across a wide range of sectors with annual turnovers between $2 million and $300 million. The purpose of the research was to understand business awareness of the Interchange Regulation and the importance of rewards within businesses
** This research was commissioned by American Express and undertaken by BDRC Australia in September 2016. The research surveyed almost 700 business decision makers in businesses with a turnover between $200k to $300m. The purpose of the research was to understand business attitudes to credit card rewards value
Inside Small Business
