Bloomberg recently wrote about the relationship breakup between American Express and Costco. A few interesting tidbits made the article:
Chenault went all out to hold on to the discounter in the U.S. Costco’s costs to accept credit cards as part of its deal with Amex was about 0.6 percent of every purchase, people familiar with the arrangements say, which was pretty cheap for any retailer, but Chenault offered to cut them further. Still, Jelinek insisted on putting the U.S. business up for grabs, too.
10 percent of the 112 million Amex cards were Costco-branded.
“Yet they decided not to tell us that 23 percent of their business was actually co-branded, which means it’s using someone else’s brand. I find those two things somewhat inconsistent.”
Whether the above is 100% accurate or not, Costco had quite the deal with Amex and it seems as though Amex was willing to provide even a better deal given that 10% of their current card base is Costco-branded. The Amex strategy of high tier, high spend consumers with award winning customer service is tough to maintain as they push further into prepaid and loyalty through offerings like Serve and Plenti. Will be interesting to see if Amex can replace cobrands like Costco.
