Fascinating (at least for payment geeks) article in Bloomberg about Costco’s new partnership with Visa and Citibank. Costco is set to issue new Citibank Visa credit cards next year when its partnership expires with AmEx in March 2016. This article notes that AmEx is paying 0.60% in interchange fees to AmEx but the new deal with Citibank will move interchange costs to near zero (after various incentives from Visa and Citibank). Citibank is going to generate revenue from the card being used at other merchants and interest on loan balances.
Very few consumer brands have a loyal customer base as Costco to strike such a profound and merchant-centric co-brand interchange agreement. Perhaps, Delta Airlines should re-evaluate its co-brand agreement. Read the full article here.