Costco, the bulk-buy club store, has been known to stock some surprising products. Caskets comes to mind, but on one trip you’ll pass an optometrist, a butcher, a person handing out free samples of yogurt smoothies, a computer salesman, and a pharmacist. New to their aisles: mortgages. Joining Walmart/Sam’s Clubs forays into the financial and insurance fields—this year Walmart began offering debit-credit cards and life insurance—Costco is also ramping up their offerings. The New York Times covers the develops:
Costco is also courting customers who are fed up with their banks. “A lot of members think their bank fees are too high, or the trust level has gone down over the years, or they’re having issues with debit and credit cards,” said Jay Smith, Costco’s director of business and financial services.
Costco sells auto and homeowners’ insurance, offers credit card processing for small businesses and began making mortgages in late 2010. It does not make money on the mortgages, which are offered by small lenders, Mr. Smith said. The idea is to get people to renew their store memberships, where Costco makes a large chunk of its profit.
The reactions to these developments, though, are mixed. While this empower consumers in ways that might not be available with today’s credit-wary banks, the services operate in a sort of shadow banking industry that does not fall under all the regulations of typical bank products. F.D.I.C. insurance, for instance, won’t apply to Walmart’s debit-credit hybrid card in partnership with American Express. As of right now, though, the businesses experimenting in the financial field, including Home Depot and Office Depot, aren’t looking to turn a large profit off these deals. Instead, the ultimate goal is to get money into the hands of consumers to spend at the very stores that are making the money available.
If Idiocracy is any indicator, Costco is poised to take an even more involved role in the lives of consumers.