Deutsche wins credit card deal for Lufthansa frequent-flyer scheme

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Deutsche Bank has bagged one of Europe’s largest and most lucrative co-branded credit card contracts, as Germany’s biggest lender seeks to fulfill its ambition to grow its payments business.

Deutsche will run the German credit card business of Lufthansa’s frequent-flyer loyalty program, known as Miles & More, from 2025. The deal is expected to more than double the annual volume of credit card transactions of the bank.

In recent years, the German lender has singled out digital payments and cash management as a high “strategic priority”. Stable and low-risk, with low regulatory capital requirements, Deutsche views the business as one that can balance more unregulated and capital-intensive investment banking and bond trading operations.

Ole Mathiesen, Deutsche’s head of cash management, said the deal, which also includes Mastercard as a provider of technology and network, would increase the number of credit cards it issues by a quarter.

Industry experts estimate that Deutsche will receive annual revenue of around €100 million from the deal. The bank declined to comment on revenue from the agreement, but the importance of the deal was underlined by the fact that chief executive Christian Sewing led the pitch for the contract.

Miles & More members are generally affluent and frequent fliers, 20 percent of whom are Deutsche customers. They “spend five times more than the average German credit card user”, said Johann-Philipp Bruns, managing director of Miles & More.

Miles & More charges credit card users an annual fee of up to €138. In return, customers collect one mile for every €2 spent on the card – the issuing bank receives a fraction of each euro. Miles & More users can redeem their miles for Lufthansa flights or for products ranging from wine to designer furniture

Deutsche has replaced the programme’s longstanding partner, DKB, an online retail bank owned by state-backed lender BayernLB.

DKB, which also runs co-branded credit cards on behalf of Porsche and Hilton, will lose a significant portion of its €13bn in annual credit card transaction volume to Deutsche. Berlin-based DKB has been a banking partner of the loyalty scheme since 1999, with Mastercard also joining in recent years.

DKB told the Financial Times it had “unfortunately” lost the bidding process for the Miles & More contract, but co-branded credit cards would remain a major source of revenue.

Peter Robjsek, head of Mastercard in Germany, said Miles & More accounts for 20 percent of the company’s credit card revenue in Germany. The US card scheme has been a long-time Deutsche partner and will replace Visa as the credit card provider for the lender’s Postbank German retail brand.