When Points Get Harder, Loyalty Gets Real

There have been a couple of significant changes this week that will have a very loud impact on loyalty; updates to the Qantas Frequent Flyer / Emirates Skywards partnership and the long-expected move from the Reserve Bank of Australia on interchange. We’re seeing the economics that underpin loyalty programs start to tighten (and let's be honest, from some of the most desirable ways to both earn and redeem points) when many businesses are preparing to rely further (and enhance) their loyalty propositions, to "sail through" the current difficult economic environment.

On the airline side, changes to the Qantas Frequent Flyer and Emirates Skywards partnership signals a clear shift in economics and value. Redemption rates on Emirates have increased (in some cases quite significantly, particularly in premium cabins), and access to reward inventory is becoming more restricted and tier-dependent in some cases. This isn’t arbitrary, it’s Emirates protecting high-yield inventory (totally understandable) and Qantas managing the rising cost of partner redemptions, which are usually significantly more expensive than fulfilling rewards on their own network. But the outcome is simple - points are getting and less valuable to burn.

On the payments side (for points accrual), the Reserve Bank of Australia has moved to significantly reduce interchange, with rates dropping from 0.8% to 0.3% and further caps on debit and international cards coming. That matters because interchange has long been a key funding mechanism behind card-linked loyalty programs (Points!) As that revenue declines, the economics of points earning come under pressure; which typically flows through to lower earn rates, fewer high-generosity products, or higher cardholder costs.

That’s an uncomfortable shift for businesses that have leaned heavily on currency as the core value exchange. Because when the economic environment changes, loyalty programs inevitably sometimes move from customer-first to margin-aware, not by choice, but by necessity. The programs that hold up won’t be the ones trying to outspend the market on points. They’ll be the ones that actually understand their customers, build value beyond earn, and use CRM properly to identify and respond to behaviour in real time and with the right incentive (whether it be benefits, bonus currency and/or rewards and discounts.) Because when the currency weakens, your loyalty strategy gets challenged and exposed.