RBA’s Interchange Shake-Up: What It Means for Your Qantas and Velocity Points

Frequent flyer points are not free. They’re funded by a complex web of merchant fees, bank revenues, and airline marketing. As the RBA seeks to change that system, so too might the rewards.

The Reserve Bank of Australia (RBA) is in the process of reshaping how card payments are regulated. Among the proposed changes are tighter limits on interchange fees — the small percentage that banks collect when you use your credit or debit card — and a ban on merchants applying separate card surcharges to customers. On the surface, these changes may feel like a win for consumers: no more “1.5% surcharge for credit cards” notices, and potentially lower costs for businesses.

But when you look deeper, there are ripple effects across Australia’s payments and rewards ecosystem. In particular, the changes could alter the economics of popular frequent flyer programs such as Qantas Frequent Flyer and Velocity, which rely heavily on bank partnerships and credit card rewards.

How Interchange Fees Fuel Rewards

Every time you pay with a card, the merchant pays a fee. Part of that fee is the interchange, which goes to the card issuer (usually a bank). These fees are one of the main income streams that fund the perks consumers have come to expect: rewards points, sign-up bonuses, lounge passes, complimentary insurance, and interest-free periods.

In Australia, co-branded airline cards — those that let you earn Qantas or Velocity points directly — depend heavily on interchange revenue. Banks use that income to cover the cost of purchasing points from the airlines and running the rewards program. The higher the interchange income, the more generous banks can afford to be with earn rates and perks.

When the RBA lowers the interchange cap, that pool of money shrinks. Banks then have to make choices: reduce the generosity of rewards, increase card fees, cut back on extras, or re-engineer their partnerships with airlines.

What the RBA Is Proposing

The RBA’s consultation paper sets out several changes. The headline items are:

• Tighter interchange fee caps. Issuers would have less scope to charge higher rates, which directly lowers the revenue banks receive per transaction.

• Ban on card surcharges. Consumers would no longer see additional fees tacked on at the checkout for paying with a credit or debit card. Instead, costs would be absorbed by merchants and, ultimately, priced into goods and services.

• Clearer benchmarks. The reforms are aimed at simplifying the system and making sure costs are transparent, consistent, and efficient.

  
  

The timing points to implementation in the 2025–2026 period. While the stated goal is greater fairness for consumers and merchants, there are natural side effects for rewards programs that have been subsidised by interchange income for decades.

Potential RBA Impact on Qantas and Velocity Frequent Flyer points

Qantas and Virgin Australia’s Velocity program are two of the largest Frequent Flyer programs in the country. Both generate revenue by selling points to banks, supermarkets, petrol chains, and other partners. In fact, frequent flyer points sales have become one of the most profitable parts of their business models.

Co-branded credit cards are a cornerstone of this setup. Banks issue cards that allow customers to earn Qantas or Velocity points per dollar spent, and the bank pays the airline for those points. Interchange fees help fund this cycle. When interchange revenue falls, banks may need to rebalance. Here’s how that could play out:

1. Reduced earn rates. The most obvious lever is to reduce how many points you earn per dollar spent. For example, a card that once earned 1 Qantas Point per $1 may drop to 0.75 points, or only award the higher rate on certain categories of spend.

   
   

2. Higher annual fees. If banks want to preserve earn rates, they may instead increase annual fees to cover the cost of buying points. Cardholders end up paying more directly out-of-pocket

   
   

3. Fewer sign-up bonuses. Big welcome offers — 100,000 points for meeting a spend threshold — are expensive to run. As margins tighten, these could become rarer or less generous.

   
   

4. Changes to perks. Complimentary insurance, lounge passes, and free additional cardholders are all “nice to have” features that can be trimmed when banks need to save.

   
   

5. Renegotiated partnerships. Airlines and banks may revisit how the economics of their deals are structured. Airlines might need to lower the cost of points, or share more of the marketing spend, to keep their programs attractive.

   
   

Qantas is especially exposed because of the sheer number of Australians tied into its program. Velocity, though smaller, operates on the same model and would also feel the effects.

Will Frequent Flyer Points Disappear?

Not at all. The RBA isn’t targeting loyalty points themselves, and neither airlines nor banks are about to walk away from programs that are still hugely profitable and popular. What’s more likely is a slow erosion of value. You’ll still earn points, but it may take longer to build up enough for a flight. Points per dollar may decline, or redemption rates may creep upward, effectively devaluing each point.

For everyday cardholders, the impact may not be dramatic immediately — especially if banks stagger changes over a few years. But for those who actively chase points and rely on credit cards to fund overseas trips or upgrades, the long-term effect could be significant.

Could Airlines Plug the Gap?

Airlines could choose to directly subsidise the programs to keep them attractive. That might mean lowering the price banks pay for points or offering more redemption options. But this comes at a cost. Airlines already operate on thin margins and face pressures from fuel prices, competition, and labour costs.

A more likely outcome is a combination of tweaks: banks scale back earn rates or perks, while airlines explore new ways to sell points. This might include expanding retail partnerships (supermarkets, online shopping portals, fuel companies) where merchants contribute to the cost of points in exchange for customer loyalty.

What Consumers Can Do Now

For individuals who love their points, here are practical steps to consider:

1. Review your cards. Look at what you’re paying in annual fees versus the points and perks you’re actually using. Sometimes a lower-fee card can deliver better net value.

   
   

2. Take advantage of current offers. If a generous sign-up bonus or earn rate suits your spending habits, it may be worth locking in before changes bite. Just avoid spending more than you normally would for the sake of points.

   
   

3. Diversify how you earn points. Airline shopping portals, fuel partners, hotel stays, and everyday retail partnerships can all supplement your balance without relying solely on interchange-funded cards.

   
   

4. Keep an eye on terms. Programs often update their conditions quietly. Watch for emails from your bank or airline, and be ready to switch if your card no longer delivers value.

   
   

5. Stay flexible. If your favourite card trims its earn rate, shop around. The market will adapt, and some issuers may find creative ways to keep their products appealing.

   
   

The Bigger Picture

From the RBA’s perspective, the reforms are about creating a fairer, more transparent payments system. Consumers will benefit from not having to pay extra at the checkout for using a card. Merchants will see lower costs and simpler pricing.

But the side effect is that one of the hidden subsidies for rewards programs is being reduced. For some Australians, especially those deeply invested in frequent flyer points, this may feel like a loss. For others who don’t play the points game, it may not register at all — except for the pleasant surprise of no card surcharges on a restaurant bill or online purchase.

In the end, the reforms aren’t likely to kill off Qantas or Velocity points, but they may reshape how generous those programs are. If history is a guide, banks and airlines will adjust, consumers will adapt, and the points game will continue — just with slightly tougher rules.

Final Word

Frequent flyer points are not free. They’re funded by a complex web of merchant fees, bank revenues, and airline marketing. As that system changes, so too will the rewards.

For cardholders, the message is simple: don’t assume your card will always deliver the same value. Keep your eyes open, do the maths, and be prepared to adjust your strategy. Points will still be there, but you may need to work a little harder to get the same flight or upgrade.