What I learned at the Co-Brand Credit Card Conference yesterday

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Anika and I were at the UK’s only annual co-brand credit card conference yesterday where representatives from most of the card groups we discuss on Head for Points meet up to discuss what is happening in the industry.  Which, at the moment, is obviously quite a lot.

If you are interested in seeing what I spoke about – none of which will be a surprise to regular readers – you can download my slides (PDF) by clicking the image below.

I would like to be able to say that we came away with an exciting new vision for where the co-brand card market is going, but we didn’t.  “No-one knows nuffin” it seems, so far.

This is what we did pick up:

One consultant felt that the impact of 0.3% interchange fees is not as bad as expected.  His logic was this:

30% – 40% fall in interchange revenue, but offset by

15% – 20% recovered through interest rate rises, annual fee rises, other tweaks

I am not convinced, partly because I do not feel that interest rate revenue is that high, and because only one card (BA Premium Plus) has hiked its fee.  I doubt MBNA would have killed its entire airline product line if the net revenue drop was only 20%.  This view only holds water if the card companies ditch their highest spending customers and attempt to sign up more people who pay interest – and there are few of those in the core London business traveller market.

Other interesting titbits:

One of the longer established co-brand travel cards has just started a root and branch review which is likely to see a substantially changed product emerge.  In this particular case it might actually be positive.

We may see cards try to reign in costs via benefit cuts (no 2-4-1 voucher?) or caps on points earning – or perhaps staggered earning tiers which reduce depending on how much you charge.  Big spenders are now a problem as the marginal miles cost exceeds the marginal interchange fee.

Cardholders are seen as insensitive to rises in fees and interest rates – seemingly true in the case of the BA Premium Plus fee rise, I agree

The current operating model (airline takes all its revenue via sign-up commissions and a ‘pence per mile’ payment) is broken.  Future co-brand agreements should be treated as ‘open book’ joint ventures with a 50 / 50 profit split, with the airline or hotel group having to accept that it is now in the credit card business.

Card data needs to become a greater source of value.  Apparently American Express has never delivered on the promises of ‘big data’ it made to British Airways.  The ability to use card data – perhaps using PSD2 to add data from other cards – must improve.  This may involve doing things which seem illogical, eg if the BAPP Amex offered double Avios on all airline purchases – not just with BA – then BA would get a better picture of how much you were spending with other carriers and could act accordingly.

‘Card linked offers’ such as the Avios and Virgin ‘in-store earning’ deals are seen as a valuable source of revenue going forward.  (Off the point, but apparently Head for Points is entirely responsible for the many changes to the Virgin / Waitrose in-store deal, because it went so crazy after we originally wrote about it that the budget was blown very quickly and emergency action was required!).

The good news is that there was not a major sense of despair in the room.  All of the parties have too much at stake.

(Want to earn more miles and points from credit cards?  Click here to visit our dedicated airline and hotel travel credit cards page or use the ‘Credit Cards Update’ link in the menu bar at the top of the page.)

When your Hilton Honors points expire, and how to stop it
Using Avios on Royal Jordanian – Part 2, the Crown Lounge at Amman airport
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  1. I find myself confused in all this. Much anger at the imagined loss of the 2-4-1. Every time I’ve considered burning Avios for a redemption I’m drawn back to an Ex-EU or sale to earn TP and more Avios. Twice last year I flew to the USA from Manchester for £1000. Once earning for 360TP for Minneapolis, and the second time 540TP from a San Antonio routed via Phoenix on the way out. Paying £500 or £600 and 100,000ish Avios instead seemed a bad deal. True I was alone so the 2-4-1 wasn’t a factor, but it wouldn’t have changed things that much. I know some get great value out to South Africa or Australia, but with Ex-EU Qatar sales east, and the same with BA/AA west, the whole 2-4-1 and Avios seems not so great, certainly not for me a deciding factor in the BAPP card. I use my Avios on Europe SH where I find good value in them. Last weekend took some family to Berlin, cash fares £250, so I paid £175 and 45,000 Avios instead of £1250, that to me is value.
    I previously used my Lloyds voucher on a positioning flight to Stockholm for another Ex-EU, I don’t see that as a waste, many did, but I couldn’t see the value in an artificial trip for the purposes solely of maximising the number of Avios it saved, regardless of it being an unwanted destination.
    I think of credit cards mostly as churn for bonuses, because that’s where I see the benefit, less so in the vouchers they offer.
    I have no idea what point I’m trying to make.

    • The 241 has become much harder to use over the last few years if you don’t have flexibilty.
      When I first starting collecting avios in 2010 I primarily wanted flights to Dubai, in J. As a family of 4 travelling during school hols that was pretty difficult, then I discovered I could easily get 4 in F.
      That has become more difficult recently as BA don’t release as many seats to avios or more people are chasing them, not sure which.
      I’ve flown Qatar cash ex eu and Etihad miles, more than BA, recently mainly due to lack of availability on BA.
      I have been using SH a lot more recently and avios is very handy if booked ahead.
      If I had to pay cash for CE there is no way I would but using avios is very handy.

      • I make it work really well as I am stuck with school holidays but our trips to the Caribbean can start and end in US cities which add an extra dimension to the holiday. This year we’re starting in Washington DC and ending in Boston so it feels like an adventure as well as a beach break, and no issues whatsoever using 2 4 1 plus Lloyds upgrade vouchers to get 3 CW seats in each direction.

    • Not everyone is interested in Ex-EU flights. There are plenty of solid HfPointers who have partners who are not interested in flying to a foreign city first, collecting baggage and staying over night in a hotel before they get on their “real holiday flight “. Add into that then changing planes in Doha….Lot’s of people value a direct flight. This entire “hobby” is subjective in value.

      • Michael Jennings says:

        Well, yes. You pay a premium for a direct flight for a reason.

      • If the choice is economy direct or ex eu, in J, I’d choose ex eu every time 🙂

      • Very true but don’t forget that some of us won’t fly in BA metal crammed in like sardines 8 abreast when we can fly in the ME3 at 4 abreast.

        I have given up on the 241 as a business class tool but I’m giving it another year to see if we can make value out of a first redemption or two. The difficulty is that we are a party of 3 and thus, we end up with less value from it than a couple would.

  2. New Card says:

    I might be missing something here but as someone who mostly flies BA using Avios redemptions in J/F I don’t see status as a particularly strong draw. Aren’t all of the significant benefits of Bronze/Silver included if you’re flying J/F anyway? So having status in that case only really helps if you also sometimes fly BA Economy…?

    • Seat selection need status I think. BA charge plenty for the good seats, upstairs on 747 for example.I think some seats are only for Gold, and can’t be bought by non-status at any price.

      • Optimus Prime says:

        Is BA the only airline charging for advanced seat selection on Business class? I’ve flown only Etihad besides them and they didn’t.

        • I don’t know, I don’t think many do. It’s a very good idea, behind the immediate anger, it means that status passengers, often booking late on high fares still have good seats to choose from. It’s discussed at length on FT, views as expected range from foaming at the mouth because they had to pay, to isn’t it wonderful I booked day before as a gold and still got 64K.

        • Getting more common.

        • £100 per seat on the upper deck of the 380

      • New Card says:

        I see … not sure I personally would see seat selection as that much of a draw. (That may especially be the case as many of my flights are with a lap infant, so I can pre-select seats anyway). I appreciate my position is unique to my circumstances but I suspect my general point – that I’m not particularly fussed about status – might not be so unique

        • +1

        • Seat selection is much more important on BA because of variation. No climb over windows seats very desirable. Mid cabin climb overs sitting next to a stranger less so. On say AA or Finn all business class seats more equal, def not the case on BA. Hence seat selection becomes important.

        • Exactly Doug M. E.g. if flying solo on a 744 there’s a huge difference in quality between 64A (quieter cabin and direct aisle access) and say 13E (sitting side by side to a stranger and having to climb over others to get to the aisle)

      • I just recently buckled and paid for seat selection for our flight to Seoul, I know its a quiet flight and I know I’d probably get an ok seat but I was 3A and B so I just paid, stops me stressing for the next 7 months.

        • Any why not if you can afford it and it gives you peace of mind. I think it’s a mindset approach. Fare is £2K, pay and then get asked for £85 to choose a seat = outrage. Fare is £2085, fine, that’s OK. I think so long as you’re properly aware, then it’s just what it is.

    • You have a point here. When I’m flying long haul/earning points rather than burning I don’t choose BA. I got to a situation where I was only flying BA economy in order to make the 4 qualifying flights – and hence I only “needed” the status for those flights – vicious circle. If you redeem avios in F you get to choose seats anyway – but yes otherwise the main benefit of chasing status is seat selection.

    • Yes I agree, if your flying J/F then having status isn’t such a perk at first glance but the seating selection can come in handy and the forcing of Avios seats for double Avios.

  3. Interesting idea about the BA TP accrual alongside spending, BUT, I have to say, a mere mortal trying to spend £60k on a credit card to attain silver, whats the point in that????

    As a reminder, LON EDI/GLA in economy is 5TP……so, for those of us that dont fly enough for work and do the odd trip flying back to Scotland for example. will never make any kind of status…bronze is pretty much a joke, it allows you to use a real person to check you in….thats pretty much about it (ooh and the pretty plastic cards to tie to your luggage)…

    I think your idea of a card that carries status is a good plan and one that IAG should be thinking about….but 60k spend (assuming BA doesnt change the goalposts and require more tier points for silver) is almost impossible.

    Lets say for example you do 5 return flights over the year to Edinburgh in economy – that will get you 50 TP leaving 550 to get for silver….this means having to spend £55,000 despite having 10 flights with BA.

    • It needs to be high though. BA would not want to be issuing more than a couple of thousand Silvers via this route I reckon.

      • Rob,

        I completely agree, but, there needs to be some balance, something achievable by normal families – otherwise, its essentially a carrot on a string that will never be attainable.

        “After assessing the earnings of 21,563,000 people, the ONS revealed that the average UK salary is £27,271”

        So, this is over double the average UK salary. I personally earn a little over 3*average salary and would struggle to put 60k on a card every year – even if I could put my rent/mortgage on it!

        BA will not give out tier points for love or money, they have to be earned, so, I cannot see them doing promotions, etc on a card to “double tier points for a month” or something like that….but there has to be a middle room….so, maybe, as an example, instead of bronze status with the card, how about 300 tier points (or bronze status equiv in TP during the cards lifetime). This would not devalue the idea of 1p/TP, but a 30k hop would be more achievable and maybe rule out the TP bonus for members who are already gold but give them something different? (say a spend related 2-4-1 as is currently?).

        All pie in the sky ideas – but something to think about I believe?

        • …sorry – typo – 0.01p/TP!

        • All individuals would want the bar set to just below what they themselves can achieve.

        • Genghis,

          Not quite sure where you are going with that one – the 30k idea is way above what your average Joe in the UK can put on a creditcard….I could easily do it….but it is not about me(or you).

          Its about making the BA Exec club still re-assuringly expensive, but giving a real benefit with a real goal that can realistically be met by people not earning enough to take business/1st class on several occasions to build tier points or even those on a short term basis being based in an office rather than travelling….

          We are all talking hypothetically here, but, if BA did decide that in a revamp of the credit cards, they will offer status as a benefit, Im sure someone involved will look at forums such as this and have heard some of Robs ideas, etc, as to how to structure the benefits. They will want to put the bar as high as they think the market can take it – and then push up a little…and if they are seeing a proponent for passengers in the industry such as Rob suggesting a £60k trigger point, they might just take that as a good place to be.

          The problem with that level is that for all bar a few folks it is completely unachievable…it might as well be £1m trigger point. Also, the folks that could spend £60k on a credit card in a year, probably have enough money to travel business class anyway – and for the benefits, such as lounge access and baggage allowence already come with buying a ticket at that level – so, what therefore is the point in status?

          So, in summary, the level has to be set high enough to be expensive, but not so expensive that it means that the only people who could possibly benefit from it, wouldnt really gain from it anyway.

      • An alternative strategy is the one Iberia is executing; Visa card for 90€ a year, 0.5 Avios per 1€ spent + IbPlus Plata (=bronze) if spent more than 9k per year. It’s not attractive for high spenders, but the average Jose in Spain is convinced by it. Essentially, Iberia prefers to focus on the average Jose (bigger population mass) than high spenders, which will switch to Amex spending whenever possible.

        • Lady London says:

          And a very nice offer coming out this weekend for those Spanish residents that do have the Iberia visa card, half price award tickets on Iberia flights. For those Spanish card holders only.

  4. OT, but Mr Walsh and some other airline execs were giving evidence to the Transport Select Committee in parliament yesterday on Heathrow expansion if anyone is interested:

    • Good to see that the stupid business culture of expensive smart formal business suit and shirt but no tie has not yet taken hold over in Parliament.

      To me you either do proper suit and tie or if you don’t want to wear a tie then you might as well wear a smart casual jacket and non directly matching trousers but not a full blown suit. Of course I know that business ladies don’t wear ties but the fact is that non Scottish men also still do not wear skirts so its not unreasonable for them to wear ties as their only remaining gender specific piece of clobber.

      • Oh yes and business men also definitely not allowed (by social convention) to do stilettos or other high heeled toe pinching footwear so why should they be being pressured in to giving up their ties???

      • RussellH says:

        To me, ‘posh business suit’ + ‘ if male, tie’ = Beware – this person is trying to put one over on you. Often, quite a useful signal. It has saved me many £100s over the years. Seriously.

  5. Somewhat disappointing that Rob managed to learn nothing at all about the Lloyds Avios Duo card’s future as that surely is the other co brand card (apart from the fee free BA Amex) that is under the biggest threat of change as I can’t see how 1.25 Avios per £ spent and/or the exchange rate levy fee free transaction benefits are sustainable in the long term for £24 per annum. I don’t see the free class of travel upgrade as being the same issue as ultimately every Avios redemption seat is one the airlines have carefully calculated as otherwise being likely to fly empty as its simply not possible to fill up all non economy seats on all flight on all routes with cash fares.

    The fact that nothing has changed with Lloyds Avios Duo so far suggests to me that either an unusually long contract was negotiated with Amex last time round and/or that the number of cardholders involved (bear in mind that this cardholder base goes all the way back to Natwest Gold Plus) is actually so large and important (unlike all the other more piddly cardholder base size airline cards that have already been pulled by MBNA) that the negotiations about what happens are very protracted indeed (with all options possibly including Amex itself reacquiring all those customers on to its own main Centurion card range, as unlike BA Lloyds surely has no particular reason for it to be essential to run a card linked with airline travel, being considered).

    At the end of the day Amex surely needs to make its mind about its European card use business strategy as one the one hand I discovered only last week that Amex cards are now being accepted by Aldi (which has only just happened) but they are hardly accepted at all in much of mainland Europe and especially in Southern Europe.

    • Doesnt the presentation slides say that this card was likely to be pulled as the contract with amex was not renewed?

      • Sorry hadn’t looked through the slides but anyway I think Rob doesn’t actually know for sure he’s just saying that most Amex co brand cards (including the Lloyds cards but not this Avios Duo one) have already been closed so he thinks this may happen here too.

        However the time gap from the other co brand Amex cards closing to now is really very large, rather suggesting to me that other options were being looked at for the Avios Duo card. This probably included selling the Lloyds Duo customer base to BA if they had won their legal argument over their kind of co-branded card or alternatively relaunching the product with a larger fee as a Visa or Mastercard. Or Lloyds could decide to only make the Avios card available to their premium banking product customers, who also already pay them a much larger annual fee, while also changing it to a Visa or Mastercard.

        It may also be that with the acquisition of MBNA’s cards division that Lloyds has to take some further really rather big decisions about where its card business is going and they have simply agreed to cover (with Amex) the extra cost of keeping the current Avios Duo card going for now unchanged until they have taken these major long terms strategic decisions.

        • Amex has terminated all license agreements in Europe on 12 January (they issued a press release). And yes, some are unusually long. In some countries, it’s up to 31/12/2019. It doesn’t mean anything that they haven’t announced it yet. They can close the card down overnight if they wish and switch existing customers to own cards with little or no notice (check your cc agremeents!)

    • BlueHorizonUK says:

      He probably does know something but cant say anything yet.

  6. Thank you Rob. Very succinct and to the point presentation.

    In store earning could be a regular income stream for card companys and I’m surprised that such an easy source of data isn’t being tapped. As long as I see value in Waitrose then I’ll keep their card however, their enhancements are starting to bite. I’d also put business transactions through in-store if they worked with my suppliers and had a tool bar.

    Going forward I see the value in Iberia’s card which seems well thought out. Afraid though that we’re the type of buyers who aren’t loyal to a particular airline or region.

  7. Bronze status doesn’t seem like much of a reward. UNLESS it put you half way to silver.

  8. OT-ish – Does anyone know if there is an SPG supplementary card holder offer on?

  9. BA “new”CW soft product back from Dubai yesterday. White company pillow cases, but no blankets yet. Still had the old amenity bags, given out on request as weren’t carrying enough!! New food service was just a faff. Nice crockery and glassware but crew moaned it was a total hassle. Food was as average as ever. Group boarding was a shambles. Seats were dirty, my light didnt work…….. Try so hard to see positve in BA, but it is becoming so very very hard. Shame. 2 x 241s used up to get 4 of us there on flat beds. worth it for the night flight there, not sure on way back….

    • Back from JNB on Mon we got the new amenity kits (I’m not a fan of the liquid lip balm) but still the old blankets etc. In the amenity kit, however, there was a leaflet saying something along the lines of “your bedding today was provided by the White Company”. Not quite…

  10. OT – no bits today, 500 nectar points for booking a Virgin East Coast ticket, any cheap options to make it worth while?

    • The usual Haymarket to Waverley hop on a VTEC train with a ticket booked for your son?

      • Perfect, I’m sure he will enjoy his £0.75 train trip.

        • palcsaky says:

          The ticket needs to be £1 or more otherwise it won’t trigger base nectar points and therefore no bonus either.

  11. RussellH says:

    Re the possibility of Tier Points being awarded on a credit card: eg Rob’s proposed super-expensive BA Amex (note: nothing would induce me to pay £295 a year for a credit card, so I do not see what follows as being applicable to myself anyway…)

    I cannot see any value for many anywhere in this idea unless BA (and others) re-design their status / tier points. Tier points have a (sometimes very) limited life. My partner’s Tier point year ends on 8 July, while mine ends on 8 May. So when we flew in J (PE upgraded with avios) to OAK on 1 July last year, the tier points she earned for the outward leg were of no value at all – they were cancelled a week later.
    I, though, have kept mine, and will qualify in a months time for bronze on our outward flights from NCL to MAD. Nevertheless, the points earned for the return, as well as those I shall get from LHR-NCE return in April, are all also completely worthless.
    Equally, status points on a Miles and More flight (LH, LX, SN) at Christmas will often be worthless, as they will be deleted a few days later.

    Personally, I should like to see Tier Points have a longer life, but more importantly, they should at least be valid on a rolling 12 month basis. For status earned on a credit card to have any value at all, using the card would need to prolong the value of one’s existing points – this would real value, while accruing a few points just a month or so before they get cancelled will be pointless (pun intended).

    • I think that would be an administrative nightmare. People gaining and losing status on a much more frequent basis as TP expired, and new ones rolled in.
      I think the way they do it is if nothing else game-able. I allowed status to lapse to bronze because I knew flights a couple of weeks later would make me silver, giving me effectively silver for two years, rather than the one year had I moved them a couple of weeks earlier to maintain status. It’s never going to please everyone.

      • RussellH says:

        I was not suggesting that one’s status should get lost that easily, but having a system where some status points are worth far more than others makes no sense at all if you are trying to sell people an expensive credit card.

        On due reflection, I think that it cannot make sense for a credit card to issue a few status points – and it is never going to be more than just a few, for the vast majority of people. But if a premium card made it a bit easier to gain or retain status by preventing status points from being cancelled, (just as a standard M+M credit card stops your reward points from expiring, so a premium card could, at least to some extent, stop status points expiring), that could indeed make sense.

    • Interesting point… can BA bring forward the Mrs’s Tier Point year so it aligns with mine? For exactly this reason, I got silver last year and she didn’t.

  12. The first time today. There is a Mastercard offering status. Its the HSBC Premier which I got given Etihad Gold from.

    Why Etihad offer this without Cobranding on the card does confuse me though.

    Has anyone used Etigad Gold to status match successfully?

    • Craig Strickland says:

      I assume that you are talking about HSBC Jade, which is invitation only and probably very exclusive.

    • New Card says:

      I thought the Etihad Gold was only awarded to HSBC Jade members (not HSBC Premier). But if you have managed to get it as a non-Jade Premier member I’d be interested to know how 🙂

      • Craig Strickland says:

        Me too.

        • I got it with my prorata refund on the card fee.

          I was indeed offered Jade by HSBC but rejected it as I said to HSBC I thought the Jade website looked like an invitation to join one of Mr Stingfellow’s Gentlemen clubs.

        • Lady London says:

          Oh no! I turned that down accidentally then…. I should have looked at it first.

    • If we’re being picky, Amex Centurion offer Virgin Gold (which apparently costs them £150 per year per cardholder). These are both very niche products though.

      • Apologies Rob, not trying not to being picky.

        Just wondering if I can status match my Etihad Gold status to one of the airline alliances.

        I’ve previously got a match from Etihad Silver to Emirates Silver as an example.

  13. Paxtonfan says:

    Having learned how cheap a crew standby ticket for immediate family members is in CW, it puts the whole thing into a new perspective. On a personal note, as someone without “status” who flies almost exclusively to the US, I try to earn a 2-4-1 which just about makes BA viable once fees, taxes, seat reservation charges, card fees etc are totted up. Otherwise, if I am converting AMEX points I prefer my redemptions on VA because it is simply a better product and the LHR clubhouse is light years better than The Galleries. After that I prefer American because I prefer the daytime return flight from the US and I can choose my seats at the time of booking. After that paying Cash for Norwegian has a better value to comfort ratio than some of the battered worn out aircraft I have experienced this year with BA and it infuriates me that BA don’t participate in the Global Entry scheme. I can only assume that MR Cruz’s business model is working for them so don’t expect any improvement any time soon. OT, I saw BA referred to on the BBC website as the National Carrier. I would like to see them forced to drop the word British from their title. Spanish Consortium Airlines sounds about right.

  14. OT but credit cards: Are the amex gold and platinum companion credit card applications subject to full credut checks or is it a soft check like supps?

    • I just got a deferred decision if that means anything. But that is normal for me, I think because I have changed addresses a lot.

      • RussellH says:

        All my Amex applications, apart from (ironically) my very first, have been deferred. I suspect that they may have taken on a new, but less accurate address database, where the field names do not match with those used for the electoral role.
        Where I live, there are no house numbers and no street names, but on the application I made two days ago I noticed that street name is a compulsory field. The name of the village was completely left out of the address generated from the postcode (and the only place I could insert it was in the street field), and the name of the house was split between the flat number and house name fields (I do not live in a flat).
        There is a really bad address database around that SPG use – it does not recognise my postcode and is convinced that I live in a rather rundown part of the town 10 miles away. I had thought that it was just SPG – until I found the same rubbish appearing on a totally unrelated website a couple of weeks ago.

      • Thanks, I’ll give it another month before applying.

  15. apologies off-topic but no bits today.
    I have an Amex Platinum which has the car hire excess insurance as a benefit. Can anyone tell me if I have to pay with the Amex Platinum card and does it matter if I prepay or pay later at the time of completing the rental?

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