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Good British Airways credit cards launch in Europe – why aren’t fintech firms entering the UK?

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New British Airways credit cards launched in France and Italy last week.  Whilst most of us won’t be able to apply for them, it is always worth keeping an eye on what benefits the airline is offering in other markets.

What is interesting is how aggressive these cards are, given that France and Italy have been impacted by the 0.3% interchange fee caps in the same way as card issuers in the UK.

There are two French versions.  The basic card offers:

  • Annual fee of €24
  • 4,000 Avios on signing and a further 2,000 Avios after spending €2,000
  • 8 Avios per €10 on general purchases
  • Double Avios on BA, Aer Lingus, Iberia, LEVEL and Vueling spend
  • 10% discount on all British Airways flights

The Premium card offers:

  • Annual fee of €96
  • 8,000 Avios on signing and a further 2,000 Avios after spending €2,000
  • 10 Avios per €10 on general purchases
  • TRIPLE Avios on BA, Aer Lingus, Iberia, LEVEL and Vueling spend
  • 10% discount on all British Airways flights

This is an exceptionally generous earning rate for a Visa card compared to the UK Avios offerings.  The basic card offers the equivalent of 1 Avis per £1.12 spent.  The premium card offers the equivalent of 1 Avios per 89p spent.  This is excellent.

The Italian cards are very similar.

There are, again, two versions.  The basic card offers:

  • Annual fee of €49
  • 4,000 Avios on signing
  • 1 Avios per €1 on general purchases
  • Double Avios on BA, Aer Lingus, Iberia, LEVEL and Vueling spend
  • 10% discount on all British Airways flights

The Premium card offers:

  • Annual fee of €95
  • 10,000 Avios on signing
  • 1 Avios per €1 on general purchases
  • TRIPLE Avios on BA, Aer Lingus, Iberia, LEVEL and Vueling spend
  • 10% discount on all British Airways flights

This is another excellent package although the earn rates are a bit odd.  Since you earn the same base rate of 1 Avios per €1 on the €49 and €95 cards, the only reason to get the Premium version is if you spend substantial amounts on IAG flights.

Why aren’t we seeing such deals in the UK?

If you want to earn Avios from a UK Visa or Mastercard, your current options are all FAR worse than the deals above.  I run through the options in this HfP article.

Having spent some time recently with a very niche start-up UK credit card issuer, I am convinced that the UK credit card market has simply grown fat and lazy on the oversized profits available before the interchange fee caps came in.

I know that one travel group we follow asked five different UK card groups to pitch for its credit card contract.  Four of the companies approached refused to do so, and the contract was awarded to the only party who bothered to show up.

But where is the competition?  Venture capital investors have poured huge amounts of money into Monzo, Revolut, Starling etc ….. companies offering online current accounts, a sector which has never even made much money for incumbent banks. 

Who is out there pumping money into start-up credit card companies, a sector which has always been very profitable?  The firm I met, which already has niche cards in issue, has just a handful of staff.  Their entire office takes up less space than the lobby of our WeWork building.

It is all very odd.  The only block to launching credit cards is the capital for your loan book, which lenders appear to be very nervous of providing to start-ups.  From my discussions this money is not easy to find because, unlike venture capital, it does not deliver equity-style returns to funders.  The BA Amex cards – which admittedly are far bigger than competing products – do £1bn per month of billings.  Finger in the air, I would estimate you would need a £3bn ‘float’ to run this card even though very few cardholders pay interest.

At the moment, we have the following companies who used to have, but have now dropped (at least for new applicants), UK airline and hotel credit cards:

  • Flybe
  • Ryanair
  • easyJet
  • United Airlines
  • American Airlines
  • Etihad Airways
  • Emirates
  • Hilton
  • Marriott

Who is going to come into the market to meet the demand which is clearly there?  It is quite clear, from what is happening in Europe, that the view that ‘0.3% interchange means you can’t make money’ is nonsense.

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Category

British Airways and Avios

Comments (83)

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

  • Startupflyer says:
    10 Dec10 December 06:09

    To your do tech question – Brexit? You would be insane to launch a high risk new loan based financial product without some political and economic certainty for the next three to five years.

    • RIccatti says:
      10 Dec10 December 06:24

      Yes and No. The good billion in billings to BA Amex card will not be affected.

      • John says:
        10 Dec10 December 06:58

        But a new product is not going to reach billions in billings for some time, if ever.

      • Alex says:
        10 Dec10 December 10:33

        Unless the UK economy seriously shrinks. then you’re looking at defaults and less spend.

    • Rob says:
      10 Dec10 December 08:21

      No you wouldn’t. Travel cards go primarily to the wealthy, I doubt there is much risk of big write offs.

      • Andrew (@andrewseftel) says:
        10 Dec10 December 09:00

        It doesn’t matter how much your job pays if you lose it! Prime/superprime card products traditionally fare worst in a recession. With slim margins and high limits, the ratio of good:bad customers needed to break even is far higher.

    • Natalia says:
      10 Dec10 December 10:06

      Rubbish. Brexit has absolutely nothing to do with it. Either the status quo is maintained or there is a shift towards the former and more generous set of rules on interchange fees.

      • Doug M says:
        10 Dec10 December 10:28

        Bit over simplified. The risk is the economic downturn that may come and the ability of people to use and payback credit cards. It’s not about the interchange fee. Your factoring in all the normal risks, and then all the Brexit risks on top.

      • Doug M says:
        10 Dec10 December 10:29

        Bit over simplified. The risk is the economic downturn that may come and the ability of people to use and payback credit cards. It’s not about the interchange fee. As a potential investor you’re factoring in all the normal risks, and then all the Brexit risks on top.

  • Frenske says:
    10 Dec10 December 06:36

    Not sure you can compare the markets. BA is based in the UK and has millions of customers here. In France and Italy they have much more competition. Perhaps BA is happy to take a little hit on the costs to make the customers chose BA/Iberia/Vuelling over more Air France, etc which provide much more options to use your points.

    • Rob says:
      10 Dec10 December 08:20

      But using the same logic, Etihad, Emirates etc would be able to find an issuer here.

      • Sundar says:
        10 Dec10 December 09:42

        Amex was marketting/selling their co-branded Alitalia card to almost everyone who was flying in Milan airport over the weekend….

      • Guesswho2000 says:
        10 Dec10 December 10:32

        But do they need to? The ME3 have geography, oil money, an excellent product and an enormous route network behind them, people will pick those carriers anyway.

        However, Qantas has a near monopoly on a lot of domestic routes, and a large international network, yet their card offerings are insane, even with RBA slapping similar interchange restrictions in place here, so I suspect complacency, and an almost flat out refusal of the UK market to accept fees for anything, plays a part. Annual fees are common almost everywhere else, but even a £24 fee in the UK is hard to push!

  • Dan says:
    10 Dec10 December 06:38

    Interesting. I have the Vueling card these guys launched a while ago in France. Is a very lucrative product. Now to see if they will give me one of these too.

  • Pangolin says:
    10 Dec10 December 06:59

    Add Lufthansa (Miles & More) to the list of companies who dropped UK credit cards, though they kept their cards in the continental countries (where the EU interchange cap also applies).

    I’ve never believed that all these cards were killed due to interchange fee restrictions. It’s just a convenient excuse to use for canning cards in the U.K.

  • Shoestring says:
    10 Dec10 December 07:02

    O/T got both my BPme £10 credits, it was 4 days from diesel purchase to credit appearing. (No success emails received.)

    SS credits all present & correct as well, not that there are many yet. (1 missing success email.)

    • Doug M says:
      10 Dec10 December 10:31

      Did you have app issues? Was at BP station last night for 10 minutes faffing with app (Android) failing and saying needs to try again. Killed app restarted, repeated, drive home without buying. One more try and then Sainsbury’s as normal for me.

      • SimonW says:
        10 Dec10 December 11:16

        Worked perfectly for me yesterday. Scanned my amex card in, then just used the first 3 digits of 4 on the front of card. which was odd but worked. then switched card and went again. Thought it was a very clever app.

      • Shoestring says:
        10 Dec10 December 11:31

        The first go took 15 mins (literally, luckily the PFS was quiet), it’s a completely rubbish app, wouldn’t log me in, rejected my 4 digit pin, then once in not very intuitive to navigate. I also killed everything including phone & started again. Worked OK finally then the second £30 tank-up went completely smoothly but of course I was logged in by then.

    • Jay says:
      10 Dec10 December 11:40

      Used offer on my BAPP and wife’s supp same day – she received email and credit applied- no email or credit for using my card as yet.

  • FlyUpTop says:
    10 Dec10 December 07:12

    Interesting to see Visa cards from BA…

  • Nigel the pensioner says:
    10 Dec10 December 07:17

    Having experienced (just for example of course) Creation “bank”, when they backed FlyBe’s card, Im convinced that I would not want to pour money into a niche market venture such as credit cards. Creation were a mess. Their C service was atrocious and their idea of security laughable. Dont know what they are like now (I think they are still out there) but when i see a new card backed by them, i simply walk away no matter what bonus they are offering. Everyone has their “Avios price” for piece of mind and mine is over 50k thank you very much!
    See you all tomorrow?? 😁

    • RussellH says:
      10 Dec10 December 17:15

      Given that Creation are owned by BNP-Pays Bas, they are part of a mjor bank, not a niche.

      As to security, their log-in is certainly more secure than Amex’s (Amex still do not have case-sensitive logins, and still just use a single username and password, while Creation is more sophiosticated than that.

      When I have had to phone them, their staff have been friendly, seem to understand what I have been saying, and I have no problems understanding them. I could not say the same for Barclaycard, however!

      • Alan says:
        10 Dec10 December 20:45

        And both are streets ahead of IHG – can’t believe they still only accept a 4-digit PIN!

  • Michael says:
    10 Dec10 December 07:23

    When it says “10 avios per €10 of spend”, I assume it means that you would get nothing for any transactions below €10?

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

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