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Costco Branded Card Driving Growth At Citi

Citi has Costco to thank for its growth recently, according to a new analysis by Business Insider.

In a report, Business Insider said Costco cards saw more than $52 billion in purchase sales during the first six months of the cards and more than $6 billion in loan growth. That compares to American Express, which saw $80 billion in Costco card purchases in 2015, putting Citi’s run rate from the card at $24 a billion a year, which is ahead of American Express.

As a result of that, the report said it’s lifting Citi’s U.S. branded cards business growth. In the fourth quarter, the unit earned $2.2 billion in revenue, which marked 15 percent growth year over year. Excluding Costco from the mix, the report found the rate declines to 2 percent year over year in terms of growth. Citi’s branded card business is becoming much more important and is one of the main drivers of its growth overall, noted the report. Other segments aren’t doing as well, with revenue in the retail banking business down 4 percent year over year, while retail services is flat compared with last year.

While the help from Costco is good news in the short term, the Business Insider report implied it could hurt the bank down the road. While Citi is enjoying a lot of growth since taking over the Costco card, it’s also resulting in an increase in costs. The report noted operational expenses in the fourth quarter increased 6 percent year over year due to the Costco card portfolio. In order to rein in some of the costs, the report said Citi will have to “overcome promotional balances.” At the end of March, Citi announced the new Citi Costco card would begin shipping to replace the American Express card that was the previous partner of Costco.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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