A cloud hangs over Macquarie Group’s white label credit card business as the bank’s freeze on new issuance of Woolworths and Myer Visa cards enters its third year.
Macquarie stopped accepting applications for the Woolies’ and Myer cards amid the economic dislocation triggered by the Covid-19 pandemic in April 2020.
At the time Macquarie characterised the freeze as a temporary measure.
"In light of the current level of financial uncertainty many Australians are facing, we have temporarily paused offering new credit card applications,” Macquarie said two years ago.
However, the decision to keep the white label programs in a holding pattern since then has mystified payments experts who are now raising questions about Macquarie’s strategic intentions in the market niche.
Most suspect that Macquarie’s freeze on card applications has tested the patience of Woolworths and Myer and will likely result in both retailers forging commercial partnerships with rival issuers.
There are significant opportunity costs for Myer and Woolies continuing to tolerate the freeze on new business.
The retailers collect fees from Macquarie for originating new card holders and also have claims, under revenue sharing agreements, to increases in customer spend generated through the respective programs.
Card programs associated with other leading national retailers such as those managed by Citigroup and Latitude Financial have remained open to new cardholders throughout the pandemic.
Citi, which manages white label card programs for Coles, Kogan and Qantas, could be a beneficiary of Macquarie’s restrictive policy.
The bank last night refused to comment on heavy industry speculation that Macquarie was looking to exit its white label operation and offload its receivables portfolio.
“We continue to issue cards to our customers and continue to support our white label partners to deliver the best value propositions to the market,” a Citi spokesperson said.
Payments industry experts said Macquarie’s prospects for continuing as a white label issuer looked dim.
“The retailers have good reasons to get their card programs up and running again for new cardholders,” said Bradford Kelly, a Sydney-based payments consultant.
“In the case of Myer and Woolworths they each have a full menu of payments options available to their customers – including BNPL, Visa, Mastercard and others - but they can’t introduce their own customers to the cards they sponsor and that bear their names.
“To pause on new applications within the programs doesn’t make economic sense for the retailers who have an incentive to keep replenishing their cardholder numbers.”
Melbourne-based payments consultant Grant Halverson agrees with Kelly.
Halverson said Macquarie’s policy was “untenable”.
“A two year freeze is totally unacceptable from a retail partner’s perspective,” he said.
“It sort of leads you to the conclusion that Macquarie might be preparing the credit card portfolio for sale.”
Banking Day last week approached Macquarie with questions relating to the bank’s strategic future in white label issuing but the bank declined to comment on its strategic plans.
A spokesperson said the bank was continuing to issue credit cards only to customers who also applied for home loans.
A Myer spokesperson refused to comment on when the retailer’s customers would be able to apply for Myer-branded credit cards.
“As our credit cards are issued and managed by Macquarie, it would be best to direct these questions to them,” a Myer spokesperson said.
The uncertainty surrounding Macquarie’s commitment to the white label programs could also play into the hands of Latitude Financial, which currently has credit card distribution agreements with Harvey Norman and JB Hi-Fi.
Under chief executive Ahmed Fahour, Latitude has been looking to boost the scale of its operations across most segments of the consumer finance market.
At the company’s profit announcement last month, Fahour highlighted the company’s ambitions to grow interest-related activities in a rising rate environment.
Latitude could be a front-runner to land a deal with Myer given that the company had a longstanding card alliance with the retailer before it was spun out of the global GE Capital group six years ago.