CBA shifts loyalty rewards toward Virgin as RBA fee caps loom

Commonwealth Bank is betting on Virgin. On Tuesday, the bank announced a sweeping overhaul of how it rewards customers—one designed to steer them toward Virgin's Velocity points scheme rather than Qantas Frequent Flyer miles, and to launch an entirely new in-house currency called Yello points. The timing is no accident. In October, the Reserve Bank will impose a ban on credit card surcharges and cap the interchange fees that banks collect from merchants each time someone swipes a card. That regulatory move will cost the banking sector roughly $660 million a year in lost revenue, and Commonwealth Bank is restructuring its entire loyalty architecture to survive it.

Under the new system, customers who convert their Yello points to airline miles will receive more generous exchange rates if they choose Virgin Velocity over Qantas Frequent Flyer. The bank has also fundamentally changed who gets rewarded and who doesn't. Customers with only a single credit card will earn fewer points on their spending. Those who bundle multiple products with the bank—a mortgage, savings account, term deposits, insurance—will earn more. It's a deliberate pivot away from what the industry calls credit card churning, where customers open cards purely for rewards, and toward deeper customer relationships that generate revenue across multiple product lines.

Angus Sullivan, who runs the bank's retail division, framed the change as expansion. More than nine million Commonwealth Bank customers will now be able to earn points on everyday banking they're already doing—their home loan, their savings, their insurance—and redeem those points on groceries, utility bills, fuel, or travel. The bank will announce the precise earning rates for each airline and retailer later on Tuesday. But the underlying logic is clear: if the bank can't make money from interchange fees the way it used to, it will make money by deepening its grip on customer wallets.

The shift toward Virgin is particularly telling. Sources familiar with the negotiations said Virgin offered Commonwealth Bank a more attractive value proposition for its Velocity points than Qantas did. In other words, Virgin was willing to give the bank more points per dollar, or more favorable terms, to secure the partnership. For Qantas, which has long been the default airline partner for Australian banks and credit cards, this is a significant blow. The airline's frequent flyer program has been a cornerstone of its customer loyalty strategy, and Commonwealth Bank's decision to deprioritize it signals a broader recalibration of the rewards landscape.

What's happening here is a collision between regulation and business model. The Reserve Bank's reforms—both the surcharge ban and the interchange fee cap—were designed to protect consumers from hidden costs and excessive fees. But they also force banks to rethink how they attract and retain customers. Loyalty programs have been a primary tool for that attraction, funded by the very fees the RBA is now capping. Commonwealth Bank's solution is to make loyalty programs less generous overall, but more targeted: rewarding customers who are already embedded in the bank's ecosystem, and less rewarding those who treat the bank as a transactional relationship.

Both the RBA's reforms and Commonwealth Bank's new points scheme take effect in October. By then, the bank will have already shifted millions of customers onto a new system, with new earning rates, new redemption options, and new incentives to bundle their financial lives into a single institution. For customers, the change may feel like a loss—fewer points, fewer options, less generous rewards. For the bank, it's a necessary adaptation to a world where the old model no longer works.