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This story appesrs in the November 2009 issue of Cards&Payments.
Diners Club International Ltd. will remain a niche brand under Discover Financial Services' ownership, but the company plans to make the brand "much bigger" through various enhancements, Rajive Chadha, the unit's president, tells Cards&Payments.
Brand recognition for Diners Club varies widely, Chadha says, noting that while Diners Club may be relatively unknown in the United States, it is one of the leading credit card brands in Ecuador, where it has 50% market share. Diners Club also is a dominant brand in Colombia and has strong consumer recognition in Japan, Eastern Europe and Latin America, he says.
Launched in 1949 as what is widely considered to be the industry's first charge card, Diners Club cards are issued by 49 franchisees in more than 185 countries. Discover does not disclose the total number of Diners Club cardholder accounts, which include mostly charge cards and some credit cards issued primarily to upscale customers and to corporations.
Turnover among franchisees is rare, and for many Diners Club is "fairly
profitable" because it generates merchant fees that are "higher than average," Chadha says, declining to disclose typical profit margins.
Most franchises have exclusivity within their markets. But in certain markets Diners Club is eliminating that provision to expand card-issuing and merchant-acquiring opportunities, Chadha says.
One such example is in Western Europe, where Citigroup previously held the exclusive Diners Club issuing and acquiring franchise. In September, U.S. Bancorp's Elavon acquiring unit bought Citi's Diners Club merchant portfolio, representing some 75,000 merchants. Citi continues to issue Diners Club cards in Western Europe.
"Where it makes sense, we have changed the agreements in some markets so they are no longer exclusive to a single issuer," Chadha says. "This will strengthen and enhance the overall card-acceptance footprint in those markets."
Chadha, who joined Diners Club last year after an 18-year career in various roles around the world at Citi, began his career working on the Diners Club brand in India. He says his goal is to help Discover and Diners Club leverage their mutual strengths while keeping the brands separate.
"Each brand has its own strengths, and we intend to build on those," Chadha says.
