Attention Costco shoppers—please disregard the recent incorrect Email you received from Citi Visa. The following article describes the latest misstep in the ongoing saga of Costco transitioning from Amex to Citi Visa as their exclusive store credit card.
Citigroup is still experiencing hurdles after purchasing the roughly 11 million cardholder Costco portfolio from American Express earlier this summer.
Last week, the firm mistakenly emailed a “small portion” of Costco members telling them that their membership had ended and their cards would be canceled, according to Business Insider. Citigroup has since notified the affected consumers that the message occurred as a result of a “systematic error.”
The error marks another in a series of problems that Citigroup has faced managing the transition.
In the week following the transition, the company fielded multiple complaints from consumers who hadn’t received new cards or were struggling to activate them and couldn’t get the necessary support. Despite that, the portfolio has been performing well, giving Citi $5.7 billion in purchases made on Citi Costco cards in its first three-and-a-half weeks.
But ongoing errors could begin to turn off consumers and increase cardholder attrition, particularly since Costco now accepts any Visa card, not just the Citigroup-branded Costco card. That would limit the potential financial impact of the portfolio, which could give Citi over $80 billion in annual billed business and help it further establish separation as the third largest US card issuer this year.
Any large and complex program is susceptible to mistakes and errors. That’s not a surprise. Unfortunately, the Costco-Citi partnership has reached the point of testing the patience, as well as the loyalty, of its customers. What looked like a big win for both Costco, Citi, and cardholders has been one pratfall after another. Delays, stakeholder agreement issues, and erroneous Email communications seem to have been a regular occurrence. Cardholders hope the problems are now history. The retail industry’s biggest volume period is fast approaching, setting the stage for whether the Costco-Citi partnership will turn out to be the sales and profit driver as planned. We will see.
Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group
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