I edited one cell of the Costco report to comment on its switch from accepting only American Express credit cards to only MasterCard (Canada) and only Visa (U.S.A).
Most retailers are virtually forced to accept both Visa and MasterCard, and often American Express as well. And most have very little bargaining power as to the merchant discount fees.
But Costco had HUGE bargaining power. Many Costco members were willing to obtain an American Express card in order to be able to use a credit card at Costco. Because Costco was in a position to accept only one type of credit card it had huge bargaining power to obtain an ultra-low merchant fee. AND because Costco is able to sign people up on a co-branded card it obtains a “bounty” on each new card signup. Costco was even able to negotiate being paid a commission on non-costco purchases on the co-branded cards.
In the U.S. the Costco co-branded Visa card is issued by Citibank. It is a reward card, with the rewards payable in certificates redeemable at Costco for cash or merchandise. The rewards are lucrative, 4% on eligible gasoline purchases (possibly Costco only?), 3% on restaurant and eligible travel purchases, 2% on all Costco purchases and 1% on all other purchases.
It is clear that Costco and the card-holders get huge benefits but it is less clear that Citibank is getting much benefit after paying Costco and paying the rewards. I would think that the VISA card issuers OTHER than Citibank are big winners as ALL Visa cards are now accepted at Costco which increases the spending on those non-costco brand VISA cards. (Same for all MasterCards in Canada)
American Express would seem to be a loser here as they lost a huge amount of spending at Costco. Also, and perhaps more importantly, America Express loses all those new customers who were obtaining America Express cards primarily just to shop at Costco. But perhaps America Express was right not to continue a deal where Costco was getting so much of the benefits. And perhaps these type of customers were not really loyal to America Express at all. If Citibank at some point was offering too good a deal to Costco then American Express may have been right to refuse to match that offer.
All of the above illustrates what a powerful retailer Costco is.