The largest bank in the nation announced a “Australian banking first” on August 18: a complete overhaul of the bank’s rewards program that will allow consumers to accrue points from debit cards, savings accounts, term deposits, home loans, and even insurance products in addition to credit cards. The Reserve Bank of Australia’s much-discussed ban on card surcharges will take effect on October 1st, coinciding with the implementation of the changes. It doesn’t seem like a coincidence.
A new currency known as Yello points will be introduced as part of the redesigned program, which is based on the current CommBank Yello platform. This is one of the biggest loyalty program changes in Australian banking history, with over nine million customers already participating in some capacity within the Yello ecosystem. For the majority of people, the change will be subtle—a notification in the app, a modification to the fine print—and they won’t notice the differences until much later.
What’s going on with Qantas is the biggest and possibly most contentious headline. The CommBank Awards program, which has long been popular among frequent travelers who use their credit cards to accrue Qantas points, will end on September 29. Qantas is virtually eliminated after that date. It is replaced as the main airline partner by Virgin Australia’s frequent flier program, Velocity. This hurts anyone who has been carefully directing transactions through a CommBank card in order to increase their Qantas status. How many consumers will discreetly take their credit card business elsewhere as a result is still unknown.
Instead, CBA is focusing on everyday value, or incentives that feel real in the school pickup line as opposed to the business class lounge. Customers can convert 3,000 Yello points into 2,000 Everyday Rewards points by joining Woolworths’ Everyday Rewards program on October 1. Once members reach the 2,000 mark, those points can then be deducted $10 from a grocery store. DoorDash, Myer, Origin Energy, and BP are among the other redemption partners; their list reads more like a weekly errands checklist than an aspirational travel program.
It seems as though CommBank is placing a wager on the current state of Australian consumers’ attention. For years, the burden of living expenses has been intense. While the dream of a business-class upgrade is still appealing, most households’ reality is more akin to trying to reduce their grocery bill. Millions of Australians already incorporate Everyday Rewards into their daily routines. Collaborating with it appears to be more of a practical assessment of the space than a daring move.
Along with a new premium card that is still in the works and is said to offer concierge access and improved airline benefits, two new credit cards are also on the horizon: a Smart card and an Ultimate card, which will completely abandon the previous Awards branding. That final one implies that CBA is not entirely giving up on the high-end traveler market. It’s more that they’re attempting to create a more expansive tent, satisfying regular customers while keeping the door open for frequent fliers.
Whether the point earn rates for each of these product categories will be high enough to be significant is yet to be determined. That formula determines whether loyalty programs succeed or fail. Technically, a program that allows you to earn money on your home loan sounds great, but it takes years to accumulate anything significant because the rate is so low. Although CBA hasn’t yet disclosed all the specifics, once customers begin doing the math, those figures will reveal the true picture.
It’s difficult to ignore the extent to which regulatory pressure seems to have shaped this. The prohibition on surcharges eliminates a source of income that banks have secretly relied upon. In that context, it becomes more crucial to create a loyalty program that promotes engagement and retention rather than interchange revenue. The action taken by CommBank appears proactive. By Christmas, it will likely be evident whether it is a well-timed rebranding exercise or something truly rewarding for regular consumers.
