Canadian Imperial Bank of Commerce will become the issuer of credit cards at Costco’s stores in Canada as the membership-only retail chain ends a previous deal with Capital One Financial.
CIBC said Thursday that it has reached a long-term agreement with Costco Wholesale that is expected to start early next year. The Toronto-based bank did not disclose the length of the contract or its financial terms. CIBC will also acquire from Capital One a portfolio of more than $3 billion in existing card balances.
For CIBC, which offers travel-related credit cards with Air Canada, the deal offers a way to attract consumers who are more interested in earning rewards for their spending on groceries and other household essentials. The bank said that the deal reflects a strategic focus on growing its Canadian consumer franchise.
“This relationship enables us to diversify our credit card portfolio in everyday rewards, grow our market share in payments and provides a meaningful opportunity to deepen relationships by meeting the financial needs of Costco members,” Laura Dottori-Attanasio, CIBC’s group head of personal and business banking, said in a press release.
Costco’s move in Canada follows a similar switch of credit card issuers in the United States six years ago. In 2015, the Issaquah, Washington-based retail chain moved to end its long-running relationship with American Express, instead signing a deal with Citigroup. That agreement
CIBC said Thursday that Canadian consumers who have Costco cards issued by Capital One will be able to use them until they receive their new cards. The cards, which can be used at other retailers in addition to Costco, will continue to run on Mastercard’s network.
“Through enhanced offerings such as leading digital capabilities, robust features and stronger rewards, our members will have more ways to get the most out of their membership,” Pierre Riel, a senior vice president at Costco Canada, said in the press release.
Capital One, of McLean, Virginia, classified the Costco loan book as “held for sale” during the second quarter, according to analysts at Keefe, Bruyette & Woods. “The announcement does not come as a surprise,” they wrote in a research note.
