CBA was one of the most competitive awards programs in the market when it came to the number of frequent flyer programs customers could transfer their points to. But from 1 October, the bank is eliminating all but one of its airline and hotel program partners.
Currently, CommBank customers with a credit card that earns CommBank Awards points can transfer their points to an impressive 12 airline and 3 hotel loyalty programs, including some airline programs that are unavailable in Australia’s other big flexible program – American Express membership rewards.
But from 1 October, Virgin Australia Velocity will be the only remaining program.
CommBank is stripping back its rewards program to Virgin Australia Velocity, or Qantas for those willing to pay an extra fee of $90 a year. The bank is also removing popular airline and hotel partners that once set the program apart, along with travel and shopping redemptions.
Founder of The Champagne Mile and Pointify, Adele Eliseo, told Travel Weekly that the value of a flexible points program is choice, and removing that choice erodes value. “Being able to move points into different schemes opens up more flights and better use of balances. Taking that away locks cardholders into Velocity and Qantas, where costs can be higher and reward seats are are hard to find.”
“It’s a loss of choice for the Commbank Awards member,” pay.com.au rewards expert Daniel Sciberras told Travel Weekly. “In effect, it’s almost like a co-branded partnership. It’s not co-branded, in that you’re not seeing their cards with the velocity logo on it, but it’s as close as you’re going to get to it.”
Why are CBA doing this?
Without being in the room, it’s hard to know what exactly CBA’s decision to axe its partners was based on. However, our experts have a few suggestions.
- Financial: it could simply be a cost-saving exercise for Commbank. If a lot of the bank’s customers are signed up to the dominant programs, Velocity and Qantas, there’s an easy argument for removing the lesser-used partners. “Maybe they just thought, ‘we’ve added complexity into our awards program and people, at least our demographic of customers, aren’t using it,” Sciberras said.
- Driven by Velocity: it’s possible that Velocity didn’t want to keep competing with the other airlines CBA was partnered with, and offered the bank something in order to be the only real partner left.
- RBA changes: the Reserve Bank is planning to reduce interchange fee caps with the aim of saving consumers money, however it could lead to devalued rewards points.
“It’s disappointing that CommBank is making these cuts well before the RBA’s interchange caps take effect, and before any erosion of reward funding is in play,” Eliseo said.
Although this pre-emption may have been a factor in CBA’s decision, Sciberras thinks it’s unlikely to have been the driving factor. “That’s only been floated very recently,” he said. “So I think [CBA’s decision] was probably on the cards before the RBA.”
What can customers do?
“Cardholders with active balances should act quickly,” Eliseo said. “Transfers into partners such as Flying Blue, Qatar Privilege Club and Marriott Bonvoy close at the end of September.”
Sciberras explains that for the Commbank awards program, the transfer rate for Velocity was far more favourable than it was for other airlines, so it’s likely that customers were already transferring to Velocity anyway. “If that’s the case, nothing is really changed for those members,” Sciberras said.
“It’s those Commbank members that were transferring out to Krisflyer, for example, or Asia Miles or Aeroplan (Air Canada’s frequent flyer program) or Mileage Plus (United Airline’s frequent flyer program). They’re the ones that are now probably having to assess and say, ‘Well do I like Velocity? Is this program going to meet my needs?'”
“They could look at the Qantas direct earn option if they want to stay with CBA,” Sciberras added. There are currently no changes for CommBank cardholders who opt-in to earn Qantas Points (instead of CommBank Awards points) for an extra $90 per year.
“CommBank once sold itself on having the broadest airline partner line-up of any major bank,” Eliseo added. “Australians who value flexibility will find it in Amex Membership Rewards, which offers the largest network of airline and hotel partners.”
There are now only two direct avenues to earn points with some of these dropped airlines: pay.com.au and the Star Alliance Rewards credit card that HSBC offers.
What’s next?
Is there now a risk that other banks will start to reduce their partner options for award programs? Or will they continue to provide customers with choice?
“Lots of banks would want to retain the Krisflyer and the Asia Miles options,” Sciberras said. Krisflyer is Singapore Airline’s frequent flyer program, and is currently a member of most Australian banks’ award programs.
“Outside of Singapore, Australia is the biggest market when it comes to Krisflyer,” Sciberras said.
Cathay Pacific’s Asia Miles frequent flyer program is also popular in Australia.
“I think that choice is very good,” Sciberras added. “So I don’t think people will be looking at it and thinking, ‘oh this is a change we want to make’.”
