The cards business of banks is not what it was, with two trends exacerbated by the cost of living crisis in Australia.
One of these is the steady decline, which threatens to become a slide, in the revolve rate of credit card balances outstanding.
The revolve rate fell to an all time low of 45.2 per cent in April 2014, analysis of the latest Reserve Bank retail payments statistics by MWE Consulting shows. This is down 130 basis points over one year and down 1050 basis points over three years.
On personal cards the revolve rate now stands at 52.0 per cent, which is 590 bps over three years.
The average balance per account is $3000.
Many years ago the combined revolve rate was 75 per cent, with this ratio a fundamental pillar of the earnings of the credit card side of any bank’s cards business.
Then there is the card issuing side, where many card fees have been competed away or limited by regulation.
The number of personal credit card accounts has fallen to 12.7 million, a decline from 15.2 million eight years ago.
Over the same period the share of purchases made on debit cards has soared, to 58.2 per cent from 44.2 per cent.
For the relatively few banks in the business of ‘acquiring’ cards transactions from merchants (which includes all the big four) there is plenty of money to be made via merchant service fees, though offset by having to pay away interchange fees – themselves also now capped by more than two decades of RBA regulation.
‘On us’ transactions, where the consumer’s card is issued by the same bank as the acquiring bank are the most profitable, with Commonwealth Bank long understood to be in the most favourable position in this regard.