ME Bank ditches credit card plans amid buy now, pay later frenzy
ME Bank has abandoned its plans to expand its credit card range, with growing frenzy around Australia’s buy now, pay later sector being cited as a key driver of this decision.
Last September, ME’s CEO Jamie McPhee announced that the bank would be rolling out more credit card products - in particular, rewards cards - on top of its current low-rate ME frank Credit Card.
However those plans have since been dropped, with McPhee saying that ME’s investment in credit cards was no longer feasible in light of the rapid spread of buy now, pay later services, including fintechs Afterpay and Zip.
In fact, statistics from Afterpay earlier this year revealed fewer Aussie millennials are now using credit cards to shop and spend - only 41% own plastic, compared to 58% in 2002.
But according to Mozo’s Banking Expert, Peter Marshall, while buy now, pay later’s rising popularity could be one factor behind ME’s decision to halt its rewards credit card plans, this isn’t the only reason.
“There are other factors that have been affecting the credit card market over a longer period of time, including the introduction of regulations that limited how much banks could charge each other for interchange fees,” Marshall said.
“Interchange fees are what banks largely relied on to fund their rewards programs, paying each other for processing payments through the credit card system. But since the regulations came into effect and the banks stopped getting so much money from interchange fees, they’ve really scaled back their rewards programs, and as a result, rewards cards benefits have taken a blow.
“So I would say that ME’s decision was at least as much a response to this trend as it was to buy now, pay later - if not more. And their decision is a sensible one, especially since they already have a competitive credit card. Why bother chasing a market that just isn’t as viable as it used to be?”
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Marshall added that while there are still plenty of rewards cards out there for Aussies who travel a lot and can stack up loads of points, they’ve become less valuable due to changes like increased annual fees and decreased points earned per dollar spent.
This means that to get the most value out of your plastic, you’ll need to choose the right rewards card for you. Our rewards revealer can lend you a hand in finding an option that suits you.
Meanwhile, some other banks have responded to buy now, pay later in a totally different manner - by diving into this new market themselves. They’ve introduced fixed payment plans, which give customers the option to pay off their credit card purchases in monthly installments - think Westpac’s Smartplan or ING’s Orange One Credit Card.
So for Aussie shoppers, the continued rivalry between banks and fintechs simply means they have more ways to pay than ever before.
“Having other options available now means that someone who doesn’t want to have access to credit in their pocket has other avenues open to them,” Marshall said.
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