Amazon and NextCard To Offer Co-Branded Credit Card

Amazon.com continued a frenetic week of activity today by announcing that it will create a co-branded credit card with Internet credit card issuer NextCard that could generate up to $150 million (US$) in fees for the online retail giant.

The five-year deal also provides Amazon with a warrant to acquire up to 4.4 million shares of NextCard, the creators of the first Internet Visa credit card. Based on the company's closing price Tuesday, the 9.9 percent stake would be worth $139 million.

The deal will make NextCard the exclusive provider of a co-branded Amazon/NextCard credit card that will be made available to Amazon's 13 million customers. Customers will receive online approval in as little as eight seconds and a host of other services provided by NextCard, Amazon said.

"We invest only in companies that share our passion for customers," Amazon.com CEO Jeff Bezos remarked. "The NextCard management team has proven its ability to deliver a customer-obsessed experience. From its customized product offers to its instant credit capabilities, NextCard leads the credit card industry as it shifts toward the Internet."

Busy As Santa's Elves

This agreement with NextCard comes one day after Amazon dramatically expanded its product line, with the launch of home improvement, video game, software and gift idea stores. The company also bought the catalog business of tool and equipment supplier Tool Crib of the North.

San Francisco, California-based NextCard is one of the leading Internet credit card suppliers. Founded in 1996, the company has some 134,000 total accounts and that number is expected to rise significantly as consumers opt for online credit cards.

In fact, Forrester Research of Cambridge, Massachusetts predicts that one of six credit cards obtained in the next five years will be issued online.

NextCard went public in May, raising $120 million. In its SEC filing, the company said that it lost $16.1 million in 1998 and anticipated significant losses for the next three years. Last month, the company announced third quarter revenue of $8 million and a net loss of $22.8 million.

In addition to working together, Amazon.com and NextCard have something else in common: They both recently sued one of their leading competitors. Amazon brought a patent infringement suit against barnesandnoble.com last month and NextCard sued Providian Financial Corp. for copyright infringement in July.