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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.

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Comments (193)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Julian says:
    22 Feb22 February 13:21

    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.

    • Julian says:
      22 Feb22 February 13:28

      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:
      22 Feb22 February 14:20

      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.

  • Cate says:
    22 Feb22 February 13:29

    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.

  • Tim says:
    22 Feb22 February 13:49

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

  • RTS says:
    22 Feb22 February 14:02

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

  • simon says:
    22 Feb22 February 14:03

    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….

    • Genghis says:
      22 Feb22 February 14:51

      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…

  • Gavin says:
    22 Feb22 February 14:27

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

    • Genghis says:
      22 Feb22 February 14:52

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

      • Gavin says:
        22 Feb22 February 15:47

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

        • palcsaky says:
          22 Feb22 February 20:22

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

  • RussellH says:
    22 Feb22 February 14:48

    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).

    • Doug M says:
      22 Feb22 February 15:50

      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:
        22 Feb22 February 19:43

        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.

    • Alex W says:
      22 Feb22 February 16:38

      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.

      • Doug M says:
        22 Feb22 February 16:58

        I think you can get a two week extension to hit a status, but no they will not move the actual year. If you (or Mrs) have nothing. Allow to lapse and create a new BAEC club on the more appropriate date?

  • Axel says:
    22 Feb22 February 17:14

    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:
      22 Feb22 February 17:26

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

    • New Card says:
      22 Feb22 February 17:27

      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:
        22 Feb22 February 17:28

        Me too.

        • Axel says:
          22 Feb22 February 17:36

          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:
          22 Feb22 February 21:42

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

    • Rob says:
      22 Feb22 February 17:41

      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.

      • Axel says:
        22 Feb22 February 17:51

        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.

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