The rising costs of using credit cards and buy now pay later services appear to be contributing to a resurgence in charge card usage across the country.
Payments data published by the Reserve Bank shows that combined purchase activity on American Express and Diner’s Club cards soared to a 21- year high of A$7.24 billion in February.
This means the charge card schemes now account for 21.8 per cent of all purchases made on credit and charge cards in Australia.
That’s the highest monthly market share recorded by AMEX and Diner’s since 2002. It’s a remarkable recovery that is being spurred, in part, by rising interest rates on credit cards.
Only three years ago – in May 2020 – the combined market share of the charge card providers had sunk to a record low of 14.8 per cent.
Since then the charge schemes have gradually eroded the combined market share of Visa and Mastercard.
The amount of spending made with Visa and Mastercard credit cards declined by 0.2 per cent to $25.9 billion in February.
The combined market share of the credit schemes now stands at 78.1 per cent.
According to an analysis of the RBA data published by payments research house, QI Insights, the aggregate spend on credit cards has declined over the last two years, which means that the revenue take of card issuers and the schemes are likely to have come under significant pressure.
Three of the major banks – CBA, Westpac and ANZ - would be particularly concerned about the sliding market share of credit cards given that they are the most lucrative income spinners among their payment products.
National Australia Bank is potentially shielded from the shift to charge card spending after it acquired the local Diner’s Club franchise as part of the Citi Australia purchase last year.
However, there is little to indicate that NAB has repositioned the long-neglected Diner’s business, which remains a low-profile brand compared to the heavily promoted AMEX moniker.
The mood throughout AMEX’s Australian operation is particularly upbeat these days even if senior executives are only issuing measured commentary on the company’s sustained market share gains.
“We are continuing to see growth across our entire portfolio, with card members spending on their cards more frequently, underpinned by more businesses accepting American Express,” said Austin Huntsdale, AMEX’s local vice president for product.
While AMEX has around 1.5 million cards on issue in Australia, the average annual spend on each card is now approaching a whopping $50,000.
The combined tally of Visa and Mastercard credit cards on issue is 16 million, but the average annual spend on each card has fallen to only $17,000.
Melbourne-based payments expert Grant Halverson – a former managing director of Diner’s Club Australia - estimates AMEX probably accounts for at least 19.6 per cent market share, with Diner’s sitting at around 2 per cent.
“The big question is whether NAB can exploit the opportunity it has before it as the new owner of Diner’s,” he said.
“We are now seeing a fundamental shift in consumer behaviour at a global level.
“The resurgence in charge cards is also apparent in the US, Europe and Japan.”