Costco announced that the retailer's credit card network will be handled by Visa next year, an announcement that comes weeks after it sideswiped Visa rival American Express in a move that ended a 16-year relationship with the retailer.
The retailer, 19th on the Fortune 500, said Citigroup (c) would be the exclusive issuer of Costco's co-branded credit cards while Visa (v) will be replacing American Express (axp) as the credit card network for Costco in the U.S. and Puerto Rico beginning April 1, 2016. Costco, known for issuing sparsely worded press releases, provided few details about the deal with Visa.
The Costco business is a big coup for Visa, as Costco is one of the nation's largest retailers. Shares of American Express dropped last month after the credit card company announced that its exclusivity deal with the wholesale club retailer was set to expire at the end of March in 2016. As WSJ reported previously, the agreement had driven a big chunk of business for American Express. But when the arrangement ends, millions of customers will be forced to use a different credit card when shopping at Costco.
Losing Costco's business will dent results at American Express, as that business generated about 8% of the company's worldwide billed business in 2014. Over 70% of the spending on those accounts occurred outside a Costco warehouse, so business was widely spread. American Express said it did try to win the business, but ultimately it was "unable to agree to terms that would have provided attractive returns for our company and our shareholders." American Express warned it could book a restructuring charge and potentially cut costs if it isn't able to generate enough business from other products to offset the lost business associated with the Costco co-branded portfolio.