Surcharge Reforms Level the Playing Field, Forcing Card Issuers to Go Back to Basics, J.D. Power Finds
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Bendigo Bank Ranks Highest in Credit Card Satisfaction
SINGAPORE: 26 Oct. 2017 — It has been an eventful year for the credit card industry in Australia brought about by the Reserve Bank of Australia’s (RBA) Card Payments Regulation reforms. To comply with these new reforms on credit card surcharges, banks are scrambling to find an optimal point in the attractiveness of the rewards program, communicating it effectively and minimizing the attrition to other card issuers, according to the J.D. Power 2017 Australia Credit Card Study,SM released today.
“Surprisingly, less than one-fourth of reward cardholders said they have been notified by their primary card issuer on the surcharge reforms and the possible impact on their credit card account,” said Anthony Chiam, Service Industry Practice Leadat J.D. Power. “Moreover, among those who were notified, only 39% understood the notification. With such a key development, it is crucial that banks ensure their customers fully understand and are educated about the implications to their card accounts.”
The RBA’s objectives to ensure consumers are not surcharged excessively seems to have worked, as 44% of cardholders have noticed a reduction in the amount of surcharges on their credit card. The study also finds that spending has increased by 18% as compared with last year ($1,547 vs. $1,311 per month, respectively).
“The playing field has now been truly levelled, as the banks can no longer outdo each other on the basis of their reward programs. Thus, the competitive advantage can be achieved through a renewed focus on going back to the basics and providing a superior service to cardholders,” said Chiam.
Additionally, with the penetration of mobile phones, usage of banks’ mobile apps has increased 11 percentage points from last year (37% vs. 26%, respectively). However, the proportion of cardholders using mobile payment services in Australia has only increased to 14% in 2017 from 8% last year. This is substantially lower, compared with other key markets, such as the United States (22%), Hong Kong (41%) and Singapore (26%). The main reason cardholders cite for not using mobile payment services is security and trust of contactless payment technology.
Following are additional key findings of the study:
- Online Accessibility: This is the most important interaction channel but only 60% of cardholders say it is accessible all the time. The main reason for this issue is website availability.
- Mobile App Usage: Gen Y has shown the largest increase with 61% having used it in the last 12 months vs 46% in 2016. Gen X increased from 30% (2016) to 39% (2017) follow by Boomers 13% (2016) to 20% (2017) and Pre-Boomers 7% (2016) to 10% (2017). This is important as the overall satisfaction on average increased from 711 (if they not used the mobile app) to 737 (if they have used).
- Spending is on the Rise: Cardholders are spending 18% more than last year ($1,547 vs. $1,311 per month), with Gen Y having the greatest increase in spending of 28 percentage points ($,1,442 vs. $1,123 per month in 2017 and 2016, respectively), followed by Pre-Boomers with an increase of 21 percentage points ($1,470 vs. $1,214 per month). Boomers have a monthly increase in spending of 14 percentage points from 2016 ($1,611 vs. $1,416, respectively), and Gen X spending increases by 3 percentage points ($1,463 vs. $1,421).
Bendigo Bank ranks highest in credit card satisfaction with an overall score of 762 and performs well in two of the six factors. American Express ranks second with a score of 760, while Coles ranks third with a score of 754.
The 2017 Australia Credit Card Satisfaction Study examines customer satisfaction with the product and service provided by their main financial institution. The study measures overall satisfaction in six key factors: interaction (31%); credit card terms (26%); billing and payment (21%); rewards (10%); benefits and services (8%); and problem resolution (4%).
The study is based on responses from 4,005 credit card customers. Coverage includes 21 major credit card issuers in the market, 14 of which are rank-eligible, with scores based on the customer’s primary card used. The study was fielded in August-September 2017.
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About J.D. Power in the Asia Pacific Region
J.D. Power has offices in Singapore, Bangkok, Kuala Lumpur, Beijing, Shanghai and Tokyo that conduct customer satisfaction research and provide consulting services in the automotive, information technology and finance industries in the Asia Pacific region. Together, the six offices bring the language of customer satisfaction to consumers and businesses in Australia, China, India, Indonesia, Japan, Malaysia, Philippines, Taiwan, Thailand and Vietnam. J.D. Power is a portfolio company of XIO Group, a global alternative investments and private equity firm headquartered in London, and is led by its four founders: Athene Li, Joseph Pacini, Murphy Qiao and Carsten Geyer. Information regarding J.D. Power and its products can be accessed through the internet at asean-oceania.jdpower.com.
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 J.D. Power defines the generations as Pre-Boomers (born before 1946); Boomers (1946-1964); Gen X (1965-1976); and Gen Y (1977-1994.