Australia’s loyalty economy – spanning everything from supermarket discounts to frequent flyer points – faces a potential reset under sweeping payments reforms by the Reserve Bank of Australia, with analysts warning that the value of rewards could decline as the funding model underpinning them is squeezed.
As announced last week, the RBA will ban card payment surcharges across Visa, Mastercard and eftpos from 1 October, but the crucial cut for rewards programs comes via the cutting of interchange fees – the payments between banks that have long financed credit card rewards and loyalty programs.
The stakes are high, given the scale and centrality of loyalty programs in Australia. Research by Finder shows loyalty schemes are “a part of everyday life”, with 91% of Australians belonging to at least one program.
Supermarket programs dominate, with 71% of Australians enrolled in Everyday Rewards and 70% in Flybuys, primarily for immediate or short-term savings like grocery cashback.
Airline schemes also represent a major pillar of the system. Qantas Frequent Flyer has around 17 million members and Velocity Frequent Flyer about 12 million, giving the two programs a combined membership exceeding 26 million, with both growing every day.
These programs are not just widespread – they are economically significant. Frequent flyer schemes alone are multi-billion-dollar assets, with Qantas’s program recently hitting a valuation of $10 billion, while Velocity is worth around $2 billion.
Crucially, much of this ecosystem is powered by credit card spending. More than one in three Australians obtained their most recent credit card to earn rewards or frequent flyer points, according to Finder, with sign-up bonuses sometimes exceeding $800 in value.
That model relies heavily on interchange fees – charges paid by merchants’ banks to cardholders’ banks on each transaction. Under the RBA reforms, those fees will be significantly reduced, with credit card interchange capped at 0.3%
Experts say this directly threatens the revenue pool used to fund rewards.
“Banks will bear a $910M revenue hit as interchange fee caps on credit cards are cut from 0.8% to 0.3%. International research evidence shows that higher annual fees, rising interest rates, and materially reduced frequent flyer rewards could likely follow. The cost doesn’t disappear, it shifts,” said Angel Zhong of RMIT University.
Because banks effectively “buy” points from airlines and retailers to distribute to cardholders, a reduction in interchange income is likely to flow through to fewer points, lower earn rates, or higher costs for consumers.
The immediate benefit of the reforms – removing those pesky and noticeable surcharges at the checkout – is clear. But the longer-term implications for loyalty programs are more complex and potentially less visible.
Finder data highlights how valuable these programs are to consumers. Frequent flyer points are typically worth between 0.3 and 0.8 cents each when used effectively, with some redemptions offering close to $100 in value per 1,000 points.
However, access to that value is already constrained, with 12% of users reporting reward flights are difficult or expensive to book.
Any reduction in rewards could further erode perceived value – particularly for credit card-linked programs that rely on high earn rates and large bonus offers to attract customers.
Industry observers expect several possible shifts, such as lower earn rates on credit card spending, fewer or smaller sign-up bonuses, higher annual card fees and reduced availability of premium flight redemptions.
These changes would disproportionately affect frequent flyer ecosystems, which depend heavily on partnerships with banks and retailers to sell points and drive engagement.
The reform could also alter consumer behaviour in a system where loyalty programs play a powerful role in spending decisions. Research shows programs influence where Australians shop, how often they spend, and even which financial products they choose.
At the same time, loyalty programs have grown rapidly in response to cost-of-living pressures, with consumers increasingly relying on rewards to offset everyday expenses.
Zhong said the ultimate outcome will depend on how transparently costs are redistributed across the system.
“The reform’s success ultimately hinges on two things: genuine fee transparency from payment providers, and real competition keeping prices in check.”
She also noted that key parts of the payments ecosystem – such as Buy Now Pay Later services and mobile wallets like Apple Pay – remain outside the current reforms, meaning competitive pressures may continue to evolve.
The RBA’s changes are designed to simplify payments and reduce visible fees, but they strike at the financial engine that has long sustained Australia’s loyalty programs.
“The RBA has offered a solution to solve a real problem,” Zhong said. “Whether this creates a fairer, more efficient system, or simply redistributes costs in less visible ways, will depend on how the transition unfolds.”
For millions of Australians who rely on points for everyday savings or aspirational travel, the result may be a quieter shift: fewer rewards, harder-to-redeem benefits, and a gradual recalibration of what loyalty is worth.