The industry is still digesting the likely effects of the move by the Reserve Bank of Australia (RBA) to regulate the rate that credit card schemes and banks may charge each other but not the rate that a merchant (travel agent) can charge the consumer.
David Newington, country manager Australia at AirPlus International, the business travel payment solutions provider, said the reforms were “good news for consumers who can expect a reduction in their travel costs. However, this will likely coincide with changes to rebates and rewards programs.”
Newington continued: “Businesses with a centralised travel payment system which provides transparency across total travel costs will be better placed to maximise the potential savings without sacrificing too much when it comes to rebates and rewards benefits.
“The effects of these changes in rebates, benefits and the costs in the booking process mean that it is essential for every company to review its payment program. This review must include the mix of payment types, lodge card, corporate card, virtual, to ensure you are wringing the maximum value from each transaction.”
The RBA review has recommended a series of reforms which will affect interchange fees and surcharges. Consumers will still pay surcharges on some payment cards, but where they do, surcharges will be no more than the amount the merchant pays its bank or payments provider to accept that type of card.
As for how the reforms will affect travel costs, AirPlus International said the new framework would mean that consumers would be much less likely to face fixed dollar surcharges.
If merchants, such as airlines, that currently impose fixed dollar surcharges wished to continue to surcharge, they would have to switch to percentage-based surcharges, unless their payment costs truly are the same across all transaction sizes, AirPlus International said.
The reforms are expected to reduce the costs of goods and services for consumers and provide them with greater choice. However, the rebates paid to commercial and private customers and the benefits of rewards programs on premium cards are expected to reduce. The major banks are already slashing the value of their credit card rewards points in anticipation of the changes.
AFTA has already noted that media reports that the cap for surcharging will be 0.5% (50bp) commencing 1 July 2016 is incorrect “as this figure relates to the interchange payments between banks and the card schemes such as Visa, MasterCard and bank issued American Express and not the rate that the merchant can charge the consumer”.
AFTA chief executive Jayson Westbury said on Tuesday “that AFTA is working with card schemes, banks and payment facilitators to ensure travel agents are not disadvantaged in these transition arrangements”. See: AFTA highlights vital points in new surcharges scheme
“AFTA has updated its member advice on surcharging with easy to understand information on this complex issue and provided it to all members and the industry at large via the AFTA website,” Westbury said.
“The new cap on interchange fees should see a decrease in the merchant rate charged to travel agents, which is the government’s policy hope for these new regulations, that merchant fees are lower for consumers.”
Written by Peter Needham