http://vipmedia.globalnews.ca/2013/07/djs623115365_high-e1376936210691.jpg?w=650
http://mypaymentprocessors.com/wp-content/uploads/2014/02/img_membership_creditcard021.jpg
The article above caught my eye last week, having just obtained a credit card for myself. It discusses how Costco will switch from only accepting American Express in Canadian stores, to having an exclusive deal with Capital One and MasterCard. Negotiations between Costco Canada and American Express fell through, ultimately ending a 15 year relationship between the two companies. In 2013 Costco’s Canadian operations resulted in $17.2 billion in revenue. Costco is arguably the largest wholesale mega-market in the world and as a credit card company, having exclusive access to their customers can be tremendously beneficial. After studying business models in class this past week, a key component of any company’s model is going to be customer relationships. Costco members tend to be very loyal; this enables credit card companies to have prime access to a large target market. If a customer switches to a Capital One credit card, they are very unlikely to have isolated use of this card within Costco locations. Chances are that the customer will end up using their new card for other purchases as well. This deal has tremendous implications for Capital One and MasterCard, considering that it allows them to grow their Canad
ian customer segment, thus improving overall revenue and profit.
Images obtained from hyperlinks at the top of the post – I do not own these images