Options for Costco’s Next Partner

Since American Express and Costco ended their partnership, the door is wide open for some competition. Before we proceed with the options, there are a few factors to consider.

First of all, currently, Costco only accepts American Express credit cards. American Express generally has higher merchant fees than MasterCard or Visa. Costco does not have a loyalty program. Costco Canada’s revenue comes in at around $15 billion (approximately in 2012). That can be a significant amount of merchant fees.

This will be a significant blow to American Express if their credit cards are no longer accepted at Costco. Though we may not come to that yet because American Express USA’s relationship is still intact.

What I do see now is that Costco is in the power seat and they can decide who will become their partner. The competition is wide open. What I am hoping is that someone comes out with a superior product to put some heat on the competition.

Ideally I would like to see Chase (Visa) or Capital One (MasterCard) come out ahead of the pack. I am more than happy to see some American companies gain more traction in Canada to put some heat on the Canadian financial institutions.