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The credit bank Cembra makes good money on the interest. Especially those of customers who pay their bills in installments.
Until recently, Cembra issued the Cumulus credit card for Migros. This was without an annual fee and therefore popular. 1.1 million cards were in circulation. They formed the main business for Cembra.
Then Migros pulled the plug; the orange giant preferred to issue the cards through Migros Bank. The industry saw Cembra’s fate sealed, and the stock plummeted.
Card stays free
But things turned out very differently: Cembra lost just two percent of its customers in 2022. Industry experts are not particularly surprised that Cembra did not go under. After all, a new card automatically comes in the mail when the old one expires – and it’s still free, says Ralf Beyeler from the Moneyland comparison service.
Marcel Stadelmann, who studies payment systems at the Zurich University of Applied Sciences (ZHAW), adds, it is becoming apparent that the population in Switzerland is rather sluggish and rarely changes providers. “This also applies to the health insurance company or the mobile phone provider.”
More than half a billion francs in sales
And that’s why business continues to do well at Cembra. Last year, the credit bank increased its sales by four percent to more than half a billion francs.
The business is also highly lucrative, with a profit margin of 30 percent. “We are very well positioned in the market,” says Cembra boss Holger Laubenthal simply. He doesn’t like to talk about making money – nor about the competition.
We are very well positioned in the market.
One thing is clear: Cembra earns most of its money from those customers who do not pay the credit card bill all at once. Then hefty interest of almost twelve percent are due. “Around 20 percent of credit card users take advantage of the partial payment option,” says Stadelmann from the ZHAW.
But Cembra also makes a lot of money with personal and car loans. In addition, the credit bank, like all providers, earns if the card is used abroad.
Complex credit card business
Competitors such as UBS, Credit Suisse and Viseca also earn very well with the credit cards. It seems amazing that more financial service providers aren’t pushing into this market. But Beyeler from Moneyland dismisses the idea: the business is very complex. “It’s purely a scale business – you can only really make money with it once you’ve issued a large number of cards.”
You can only make money when you have issued numerous cards.
And because people are lazy about switching, it’s difficult to open up the market. It’s not worth it for foreign banks, the regulatory hurdles are too high.
Nevertheless, the credit card market is moving: Digital offers from existing banks or neobanks should roll up the market. But this happens in slow motion, says payment expert Stadelmann. “It’s more of a marginal phenomenon,” he says. The neo-banks are often used as a supplement to traditional banking services, but only rarely as a replacement.
Physical cards are just more reliable. And so everything will probably remain the same in the Swiss credit card business for the foreseeable future.