Banks get tactical to cash in on miles-card market

Singapore

AIR travel may be largely off the table this year, but banks aren't letting up on the lucrative miles-card market.

Banks and card issuers are getting tactical for now by tweaking the miles spending for most customers who are changing their spending habits.

To be sure, overall retail spending has suffered as economic conditions deteriorate. Takings at the till saw record falls in April (40.3 per cent) and May (52.1 per cent), but the slump eased in June after the resumption of some business activity.

Yet, most banks have reported an increase on spending on their miles-cards. This is not just because of more generous miles accrual programmes for now, but also as banks have targeted their promotions on online spending. They have also expanded award redemption options.

DBS's deputy head of cards Huong Tran said the bank saw online spending on Altitude cards more than double year-on-year, from April to May. The number of customers who spent on their Altitude card also rose by 10 per cent during the same period.

This comes as DBS has doubled the miles earned - to up to four miles per dollar - on its Altitude cards for all online spending and in-store purchases until the end of August.

To ride on the growing demand for staycations, the bank has also partnered with travel search engine Agoda to offer up to 10 miles per S$1 spent on accommodation bookings. The partnership with Agoda will run for the rest of the year.

Citi Singapore adopted a similar approach for its Citi PremierMiles cards, partnering with Agoda to offer up to 7 Citi Miles per dollar spent on bookings made till the end of August, for stays until March 2021.

Citi has also given out bonus miles and points to cardholders who spend on groceries, food delivery, products from pharmacies, as well as entertainment.

With the pandemic digitalising consumption habits, especially among younger consumers, HSBC has revamped its Revolution card, which now earns four miles per dollar spent on online purchases and contactless payments, where previously, cardholders would earn two miles per dollar spent on online purchases, local dining and entertainment.

UOB has also increased miles earning rate to up to three KrisFlyer miles per dollar spent (up from 1.2 miles), when KrisFlyer UOB card members purchase essentials such as groceries, electronics, and health and beauty products.

The bank also saw expenses on its flagship miles cards - the UOB PRVI Miles card and the KrisFlyer UOB credit card - rise during the pandemic. Spending on groceries and electronics went by 85 per cent and 44 per cent, respectively, from January to June 2020 compared with the same period last year.

Cards with miles are flexible too, in that they also allow customers to use the miles as points to redeem for vouchers, rewards, or cash to offset against the card bill. Each bank and card issuer determines its own conversion rate, so customers can also pick which miles-card is now offering the best deals - from Foodpanda vouchers, to direct cash offsets.

So as working from home becomes a new norm, American Express has introduced promotions for card members to redeem miles for coffee machines, laptop stands and seat rests. AmEx has also been offering bonus miles when cardholders spend on rides and food deliveries via ride-hailing giant Grab.

OCBC's head of cards business Vincent Tan said the bank has built in sufficient flexibility to its 90ºN Mastercard credit card such that it saw no need to make changes to or boost its existing value propositions despite travel restrictions.

There are no publicly available figures on the size of the miles-card market, but an internal market survey by personal finance comparison site SingSaver showed that about three in 10 Singapore resident hold a miles card, and about a quarter consider air miles one of their top three benefits when choosing a card.

Since the onset of the pandemic, however, interest in miles cards has more than halved, whereas interest in cashback cards has risen by a third, according to the platform's metrics.

Aaron Wong, who runs travel hacking site The Milelion, said that banks have been doubling down on promoting rewards and air miles cards, rather than cashback cards, with cashbacks more expensive to offer as the cost is borne solely by the banks.

The cost of rewards are partly borne by the merchants, including airlines.

"People who use miles and rewards cards tend to come from a more affluent section of the market and hence spend more than those who use cashback cards," he added.

Even as issuers are pulling out all the stops, there is a concern among cardholders that airlines may devalue miles such that when travel resumes, a larger number of miles will be required to purchase each flight.

Still, Mr Wong said this is less likely to happen for flag carriers backed by national governments, such as Singapore Airlines.

"Devaluations don't generate cash for the airline, it is purely an accounting exercise. (It could make sense) if there is strong competition between passengers paying by miles and those paying by cash," he said.

"Given that the load factor for most airlines are at an all-time low, this is unlikely to happen, particularly for carriers that have managed to shore up financing."

The resilience of the miles-card market has also been enhanced by banks' moves in recent years to offer points and rewards that will never expire - DBS, OCBC and Citi are among the banks that have done so.

Banks remain eager to entice prospective customers to accumulate miles ahead of the time when travelling becomes a norm again.

At Standard Chartered, new customers will get up to 85,000 KrisFlyer Miles or up to S$800 in cash rewards when they sign up for the bank's Visa Infinite X Card from now to the end of the year.

Maybank said it also has "tactical programmes" in place for customers to earn points at an accelerated rate, for which they can exchange for air miles, said Karen Low, Maybank's head of cards and unsecured lending. "When the situation improves and air travel is gradually permitted, we believe that cardholders would still like to redeem air miles with their loyalty points," she said. Apart from encouraging KrisFlyer members to use their miles for other purchases, Singapore's flag carrier Singapore Airlines have also launched programmes to encourage members to use their miles to buy meals for healthcare workers, public transport operators, cabbies and migrant workers.

KrisFlyer members can also donate their miles to frontline healthcare providers and essential workers.