Why are co-branded credit cards not successful in France?

In a previous article we told you that one of the best ways to easily achieve status on a loyalty program and maximize its benefits was to take a co-branded credit card.

Unfortunately, co-branded credit cards in the travel industry (hotel or airline) are almost non-existent in France which makes the French, even the Europeans, are disadvantaged by loyalty programs designed primarily for North American customers who benefits from such cards, which provide them with substantial benefits. Thresholds that seem unattainable for us are in fact much simpler for our neighbors from across the Atlantic.

How is it that these cards are so rare in our country, that their benefits are so minimal and that they have such little success?

There is both a supply and a demand problem.

No loyalty culture in France

A demand problem to begin with. Compared to North Americans it is obvious but also compared to some European countries, the French don’t have the culture of loyalty programs in travel. This can be explained in two ways.

Either they play the “I buy French” card and don’t ask themselves the question: I fly on Air France and sleep at Accor. But even in this case, when you always go to the same shop, it is even more important to get the maximum benefit from a loyalty program.

So be it. they travel less than others for professional reasons and have no reason to optimize anything given the number of flights and nights consumed, nor do they have any benefits to gain during their family vacations from the business trips made solo during the year. I’m leaning towards this option.

When you see that all the blogs and media specialized on the subject are Anglo-Saxon and that there is almost nothing on the subject in France, there is necessarily a reason.

French banks cannot afford to make co-branded cards

But there is also a problem with the offer: what good is a co-branded credit card if the benefits it offers are ridiculous compared to the annual fee charged?

In France, only the Amex Air France is more or less correct, and still…The benefits it offers are light years ahead of what an Amex co-branded Delta Airlines offers in the US and if it is useful to acquire/conserve a status (60 XP per year offered to platinum members), once you have reached the platinum status for life it is urgent to take a “normal” Amex Platinum which offers many more advantages overall but nothing specific to Air France.

But to conclude that banks and financial institutions in France are stingy (I remind you that in the case of a co-branded credit card, it is the bank that buys from the airline all the miles and bonus points it offers you) would be going too fast. Who would be stupid enough to deprive themselves of a very effective lever to attract new customers?

The truth is that as you may have read in the article I mentioned in the previous paragraph, selling miles to banks is a very lucrative business for airlines in the US. The corollary is that this is very expensive for the banks, which must make this expense profitable. And to achieve this, the US system is much more advantageous for them.

How do US banks fund the miles they offer to their customers?

What is called a credit card in France is not a “real” credit card in the true sense of the word. It is a debit card with immediate or deferred debit. Either your account is debited cash at the time of the expense, or at the end of the month. And that is interest-free.

In the United States, the logic is one of permanent indebtedness. You spend what you want with no fixed repayment term (that is, until you can’t pay it back and the bank says stop and comes to repossess your car, your furniture or your house). And of course there is an interest rate that depends on the bank and your “Credit Score” (a score that is given to you based on the fact that you pay back regularly, you pay your bills and rents on time etc…).

This rate is usually well over 12% and can be as high as 25% or more! With that, it’s no wonder that banks can afford to offer you miles galore since you financed them yourself with the interest you pay on your expenses!

But that’s not all. US credit cards offer what is called “cashback”: each month you are reimbursed 1, 2 or 3% of some of your expenses! And of course a co-branded credit card will earn you even more cashback when you buy tickets from the airline concerned.

But then again, money doesn’t fall from the sky! For each transaction, the bank charges an interchange fee, which in the US is about 2% (and may increase soon). In order to pay you back money, it takes from this commission…and therefore only gives you back money that it has already taken from you.

The problem in France? The interchange fee is about 0.2 or 0.3%. Unless you offer a cashback of 0.1% with no appeal to the customer, this is another benefit that cannot be financed in France.

By the way, if you hang out on American travel blogs, you’ll find a plethora of articles on co-branded credit cards, their advantages etc. Why ? First of all because it’s an integral part of the way you optimize your loyalty program there but also because each newly acquired customer is so profitable for the banks that they give fat commissions to bloggers who put links from their articles to their application forms. So much so that some of our “colleagues” in the US with a large audience almost totally finance their trips with the banks’ referral programs. Nothing like that here. But it shows you how important this business is!

Is the French customer losing that much?

A lot of people think “ah if I was in the US or if I had a US account I could have a card that gives me tons of benefits” and I’m not sure that’s a good calculation or that you lose a lot.

In France, the only cost of a credit card, co-branded or not, is the annual fee, around 500 to 600€ for a platinum, 200€ for a gold.

There, between the interchange fees and the cost of the credit, the annual cost for the consumer can become astronomical and I’m not even talking about the risk of being broke if we are not careful! No wonder the banks manage to finance huge mileage bonuses with what they take from their customers every month!

Yes, co-branded credit cards in the U.S. give huge advantages over their European counterparts, but they can afford it because they cost you infinitely more and only give you back some of the money you already gave them. French banks simply do not have the means in our banking system to finance the massive acquisition of miles from airlines.

And that’s why it won’t work in France or even in Europe in the current state of the system, which I don’t think is such a bad thing! But the fact remains that when a loyalty program is designed to work with the generous bonuses granted by banks to co-branded cardholders, it is truly unequal for French and even European customers.

Photo : Co-branded credit card de Jeramey Lende via Shutterstock

Bertrand Duperrin
Bertrand Duperrinhttp://www.duperrin.com
Compulsive traveler, present in the French #avgeek community since the late 2000s and passionate about (long) travel since his youth, Bertrand Duperrin co-founded Travel Guys with Olivier Delestre in March 2015.

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