Frankfurt Probably the best-known credit card with a bonus function in Germany, the Lufthansa Miles & More Credit Card, is changing banks. From mid-2025, Deutsche Bank will issue payment cards for Lufthansa’s frequent flyer program. The institute was able to assert itself in a worldwide tender. Miles & More is thus ending its long-standing collaboration with Deutsche Kreditbank (DKB).
Deutsche Bank has thus secured an important mandate in payment transactions, which the institute intends to expand. “The partnership with Miles & More is a milestone for our strategy in the transaction business because it is the largest, most attractive and most successful co-brand portfolio in Europe,” said Ole Matthiessen, Head of Cash Management at Deutsche Bank, the Handelsblatt.
With co-branding, banks issue a credit card together with a partner company under their brand. The card bears the partner’s name – such as Miles & More.
But behind it are the credit card provider, in this case Mastercard, and a classic bank. “The Miles & More credit card will become an important component in the product area of our private customer business,” emphasizes Deutschbanker Matthiessen.
These are the most important questions and answers about the deal:
How attractive is the Miles & More mandate?
The credit card portfolio of the Miles & More frequent flyer program is considered an attractive mandate in the German card market: Anyone who can and wants to afford the fees for a Miles & More credit card usually earns above average, so they have a good credit rating.
Because cardholders collect miles with every payment transaction, they use the cards more intensively than the average credit card customer. “Customers who use the credit card use it up to five times as often as other credit card users,” says Johann-Philipp Bruns, Managing Director of Miles & More GmbH.
Those involved do not want to reveal how many credit cards will migrate from DKB to Deutsche Bank in 2025. Deutsche Bank only says that the number of cards it issues – which it does not want to disclose – would increase by 25 percent as a result of the agreement. The DKB annual report gives an idea of how high the credit card sales of Miles & More customers are: Last year, the co-branded credit cards accounted for 13 billion euros in sales.
Since Miles & More is said to account for the lion’s share of this sum, according to industry circles, Deutsche Bank can probably handle an additional transaction volume in the low double-digit billion range calculate. Card sales at Deutsche Bank are likely to more than double as a result of the deal, a person familiar with the matter said.
How is the market for credit cards with a bonus function doing?
Overall, the co-branding market for credit cards has been under pressure for some time. In 2015, the so-called interchange fees were capped at 0.3 percent of card sales. Before that, the fees that a seller had to pay to the card-issuing bank for a payment transaction were a good one percent. This cap severely cut the margin for the credit card bank, from which they also have to pay the bonus for the card user.
However, the cap only applies to privately used credit cards. Corporate credit cards have higher fees. Since there is said to be a significant proportion of commercial cards in the Miles & More portfolio, the average fees here are slightly higher on average.
In addition, the credit card market in Germany is no longer growing. According to data from the European Central Bank (ECB), the number of credit cards issued in Germany fell by around five percent to 38.4 million in 2021. In any case, consumers use credit cards less often than in many other countries.
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Recently, some banks had therefore withdrawn from the market. This applies, for example, to Landesbank Berlin (LBB), once the market leader in the co-branding market, which previously managed the ADAC and Amazon credit cards. She announced the winding up of this line of business in 2021. Solarisbank has taken over the mandate for the ADAC credit cards. Amazon has not yet found a new banking partner for its credit cards. Commerzbank and Deutsche Bahn also ended their credit card cooperation last year and terminated numerous Tui credit cards.
Because of these trends, experts have long assumed that the co-branding market is only worthwhile for a few large banks that issue a large number of credit cards and process transactions and can therefore live with the shrinking margins. Deutsche Bank, which together with Postbank serves 19 million customers, issues a relatively large number of credit cards and should therefore belong to this group.
What does Deutsche Bank expect from the mandate?
Despite all the adversities in the co-branding market in general, Deutsche Bank is making money with the mandate, even without all the additional growth opportunities that those involved are hoping for. That’s what you hear in industry circles. In addition, the deal for the money house offers even more opportunities.
The money house wants to grow in payment transactions. The Miles & More mandate is seen as a signal for the bank’s great ambitions in this business area.
(Photo: imago images/Future Image)
On the one hand, Miles & More credit card holders will officially become Deutsche Bank customers from mid-2025. This means that the institute can officially contact these people and make them offers beyond the credit card.
On the other hand, the partnership sends out a signal with a view to further mandates for issuing credit cards (“issuing”). “Due to its size, the Miles & More portfolio is very attractive and we see many growth opportunities beyond the current scope within this cooperation,” says Deutschbanker Matthiessen. “But of course the co-branding area is an important anchor that can be used to further expand the issuing business in the medium term, especially with an international focus.”
It “makes it clear that we are serious about growing in this area. This will also help us to enter into such partnerships in other sectors or regions and thus scale our investments,” says Matthiessen.
What is Miles & More hoping for from the partner swap?
Lufthansa’s loyalty program wants to evolve and no longer rely solely on credit cards. “With the new partnership, we also want to open up new target groups and further develop the product of the Miles & More credit card on the digital level,” says Managing Director Bruns. With its 19 million private customers, Deutsche Bank offers “huge potential”.
>>Read here: These five numbers show how payment behavior is changing
Not all Miles & More members are frequent flyers. The Lufthansa bonus program has therefore expanded its offering for earning and redeeming miles in many areas in recent years. The credit cards are only worthwhile for frequent flyers because of the annual fees. A payments expert, who wishes to remain anonymous, adds that not every non-frequent flyer would necessarily have the necessary financial strength to be accepted as a credit card customer.
From the point of view of Miles & More Managing Director Bruns, the credit card does not have to remain the only payment option. “We are also fundamentally considering whether and how we want to further develop the payment function at Miles & More. We’re also looking to reach customers who don’t use credit cards,” he says. What exactly he has in mind, he leaves open. “There are many possible digital products in payment transactions.”
Mastercard, the third partner in the group, is also open to new ideas. “Of course we have to react to the technological developments in the payment area,” says Germany boss Peter Robejsek. Mastercard is constantly working on its services. “Technology and trends such as blockchain, the metaverse or generative artificial intelligence open up completely new perspectives for us.”
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