Thirty-eight per cent of loyalty points go unredeemed, costing the average Australian household about $310 a year, the ACCC's 2025 Digital Markets Study found. The country's loyalty programmes are a roughly $4.2 billion market, and the ACCC is proposing mandatory disclosure of breakage rates plus a 36-month cap on expiries to curb forfeited balances. Regulators say those changes would strip about $1.3 billion a year from operators' reported income — a risk investors have already started to price in.

The points paradox What looks like a consumer perk has become a recurring profit line on corporate balance sheets. When points aren’t spent they’re recorded as an accounting liability; over time many programmes convert those liabilities into income via expiry rules and inactivity clauses. That shift is the core of what analysts call the points paradox: liabilities turning into earnings. Breakage is the industry term for unredeemed rewards. Reserve Bank of Australia payment-system figures show breakage rates climbing to 38% for major Australian schemes, up from 29% in 2022. Programmes commonly impose time limits, often expiring points after 12–24 months of inactivity. For members it looks like a lost benefit; for operators it becomes reported income. How breakage fuels profits Some operators now rely on breakage to bolster reported earnings. Coles Group’s Flybuys disclosed breakage contributed about $180 million to EBITDA in FY2024 — roughly 22% of the loyalty arm’s adjusted earnings — a fact highlighted during the ACCC inquiry. There is also fragmentation: the average Australian belongs to about 6.7 loyalty programmes but actively uses fewer than two. That gap creates what industry participants call a fragmentation tax — consumers face membership overhead across multiple schemes while only a couple deliver meaningful value. Retailers fund programmes through product margins and commercial deals, which spreads the cost into prices. Regulatory pressure and the proposed fixes The ACCC’s 2025 Digital Markets Study targeted the economics behind breakage and recommended two main changes: mandatory disclosure of breakage rates and a maximum expiry window of 36 months. The ACCC estimates those measures could remove about $1.3 billion a year from loyalty-programme operators’ income. Market reaction was immediate: Wesfarmers, Coles’ parent, traded down 1.8% after the report, and investment-bank analysis flagged lower valuation multiples for loyalty divisions as investors priced in regulatory risk. Who pays the price Households pay in two ways: forfeited points and indirectly through higher prices that help fund loyalty schemes. The ACCC’s estimate of about $310 per household in forfeited value each year is an average that highlights a hidden cost as schemes multiply. With tight household budgets, these losses matter. Consumers under cost-of-living pressure are more likely to scrutinise where value actually arrives and to question whether complex loyalty rules are worth the effort. The ACCC has framed trust and transparency in loyalty programmes as central consumer-protection concerns.

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The ACCC recommends mandatory disclosure of breakage rates and a 36-month cap on expiries; it says those measures would shave about $1.3 billion a year from loyalty operators’ income while returning value to consumers.

This article was created with AI assistance.