The RBA is coming for your Qantas points. Who’s going to pay?
The airline’s frequent flyer program is one of the great Australian rackets that not even the big banks seem to be able to stop. Can the central bank?
14 Sept, 2025
Buy a house, set up an offset account, get a Qantas credit card – it’s an Australian rite of passage. Buy the groceries, earn Qantas points. Put the council rates on the credit card, earn Qantas points. Pay the insurance, earn Qantas points
Qantas Frequent Flyer, with its 17.6 million members, is one of Australia’s great businesses. What feels like a free lunch is really just customers paying for their own points via higher prices at the checkout, higher credit card fees or “reward” money back from a bank that charged a merchant more than it needed to.
QFF customers
effectively buy their own points and then struggle to use them. Members “earned” 222 billion points last financial year and redeemed 185 billion, or 20 per cent fewer, which is a pretty normal year for the airline. All those points are a big part of Qantas’ $3.6 billion in unredeemed QFF revenue, which is up 60 per cent in the past decade.
Yet, there’s no little point arguing the merits because
Australians are hooked. More than 35 per cent of all of Australia’s credit card spending is on Qantas points-earning cards. The major banks have to offer them and are big points buyers; the big retailers, such as Woolworths and BP, are also big points buyers. It’s a brilliant money-spinner for Qantas.
The aptly named Qantas Loyalty (because customers are so addicted) recorded $2.9 billion in revenue and $556 million in underlying earnings before interest and tax last financial year.
It’s so good that no one seems to be talking about how the RBA’s payments system crackdown, designed to strip up to $900 million out of banks’ pockets and specifically give them less to spend on rewards (read: points), could hurt.
Qantas Loyalty chief executive Andrew Glance, who used to be responsible for the banks, got only one question on it and shrugged it off at the airline’s full-year results last month.
“W
e have very, very deep relationships with our banking partners dating back near 30 years,” he said. “
We have many levers available to us across a very diverse program, as do the banks … We absolutely remain confident in terms of the [$800 million to $1 billion EBIT] targets that we’ve put out there to 2030.”.
Are Qantas points now so ingrained in Australian culture that they’re a non-negotiable marketing expense for the banks? Are customers so sticky and so blinded by the points that they will pay even more for supposedly premium Qantas-linked cards?
The banks don’t want to talk about it publicly, but it sounds like the answer is yes to both.
They’re fighting the RBA’s proposed payments crackdown while trying to keep Qantas and the Qantas points out of it. Qantas is using its strong brand and political power to push back against the RBA’s proposal, too, although it also didn’t go anywhere near the rewards points issue in its submission.
But surely the RBA clamping down on this racket is a risk worth considering. Qantas has high hopes for the business, and analysts expect it could be the airline’s second-biggest earner within three years.
The big business of Qantas points
To understand the link between the RBA and Qantas points, you have to understand how banks recoup their costs (and raise some of the money for rewards) on credit cards and how Qantas Loyalty makes money. Every time a customer uses a credit card to buy goods, the merchant’s payment services provider pays what’s called an interchange fee to the cardholder’s bank (the card issuer).
This interchange fee can be worth up to 80 basis points, or 8¢ for every $10, for any one transaction, and no more than 50 basis points on average across the bank’s book. The truth is small business merchants pay the bigger rates, while the likes of Woolworths and Coles pay a fraction of the cap (in basis points terms).
Products that provide rewards to the cardholder, such as a Qantas points-linked card, will typically have higher interchange fees. The fees can be used to fund rewards programs, pay the bank for building payments infrastructure and issuing the card, and help with the cardholder’s interest-free period.
Now the RBA wants to slash the interchange fee cap to 30 basis points, which it says would cut domestic issuers (mostly banks) interchange revenue by about $900 million. It released a 137-page consultation paper in July as part of a broader suite of proposed payments changes, and bankers expect to hear more on where it’s headed in December.
If it plays out, it will have a material impact on credit card economics for all the banks, particularly the big four, which makes it very much worth watching for Qantas.
In theory, that’s $900 million less to spend on Qantas points and other costs of issuing and running a credit card business, which is a lot of money. If the banks are as addicted to rewards as their customers supposedly are, they will have to increase credit card fees/interest rates or shorten the interest rate-free period to recoup the revenue from customers, or wear the added expense as a marketing cost.
The banks have plenty of well-founded concerns with the interchange fee proposal, including that American Express, which is outside the RBA’s regime and charges merchants much more than 80 basis points, could run away with Australia’s credit card market. Submissions by Commonwealth Bank of Australia and National Australia Bank, the two biggest credit card issuers, and No.3 player Westpac were all released last week. So was the Qantas submission.
Qantas argued against a ban on card surcharges (unlike the banks, which supported it) and the interchange fee changes. It said a similar 30 basis point interchange fee cap implemented in the UK a decade ago saw “average credit card annual percentage rates increased by approximately 4 percentage points above the rise in base rates” and noted that Australian reward credit card interest rates were generally lower than in the UK.
Qantas has never disclosed how much money it makes from the big banks and other Australian credit card issuers. However, it’s hard to see how the banks would be among its biggest points buyers. Qantas argues it has a good audience for the banks, premium customers and good credit, although they’re also playing the other side with American Express.
The big thing for Qantas Loyalty is to keep QFF members earning points and redeeming them. Qantas Loyalty records revenue on the sale of points (marketing revenue), redemption of points (redemption revenue) and commission on the sale of products such as insurance.
Qantas is promising to get more QFF customers to redeem points this financial year (it guided for points redeemed to grow faster than points earned), including via its still-new Classic Plus reward flights program.
“
That redemption event drives a significant satisfaction for a member, and that is the stimulating factor in the flywheel for that member to re-earn,” Qantas chief executive Vanessa Hudson told analysts last month. “A
nd that’s a very, very important part of the economics and the flywheel effect in loyalty.”
The more points customers earn and redeem, the more they tend to earn and redeem (over and over), which reinforces the airline’s brand and market position.
Hudson has the business flying – it was flying before she took the chief executive job. It got through a similar interchange fee turbulence in 2017, when the 80 basis point cap was introduced, and if it is similarly little scathed by the RBA’s proposed changes, the rewards for Qantas shareholders should be high. Analysts have big growth expectations.
The $2.9 billion revenue Qantas Loyalty recorded in the year to June 30 was up from $2.5 billion last year and $1.5 billion just before the COVID-19 pandemic. Barrenjoey analyst Matt Ryan expects it to increase to $3.9 billion in the coming three financial years and thinks it will be the airline’s second-biggest earner behind its Qantas domestic business in FY28.