Commonwealth Bank Criticises Proposed Credit Card Reforms

Commonwealth Bank credit card division has harshly criticises the proposals for credit card reform that could see its revenue earned through credit card fees cut significantly. This would come at a bad time for the bank, in the midst of dealing with a slowing economy and increasing credit card debt.

In the last 6 years, the Reserve bank of Australia its own fees which are associated with transactions that deal with moving funds from their payment system onto a card operated by banking provide. Further, Philip Lowe, the assistant governor of financial systems at RBA, informed a federal parliamentary committee that interchange fees could be cut much further, or possibly removed entirely.

One can only speculate at the reasons a major credit card provider and financial institution such as Commonwealth Bank, who are benefiting from the transaction processing costs being greatly reduced, are unwilling to pass these savings on to credit card consumers.

On the flip side, one could argue that Australian banks have quite enough problems in front of them, due to the generally degraded state of the global financial markets. Borrowing costs have increased significantly, and these costs have mostly been offset to the customer base, making demand for new credit cards low, or the need for the best credit cards at the keenest interest rates higher.

If we balance the reduced transaction costs against the generally much inflated price of lending we can start to understand why Commonwealth Bank may be less than keen to lower their overall profits, by reducing credit card fees. Put plainly, the higher cost of lending coupled with less consumer demand for credit card products, is already seeing their profit being eaten away. Reducing credit card fees would further nibble away at the remaining profit line.