Diners Club International

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Diners Club
Type Subsidiary of Discover Financial
Industry Finance
Founded 1950
Founder(s) Frank X. McNamara
Ralph Schneider
Matty Simmons
Alfred Bloomingdale
Headquarters Riverwoods, Illinois, U.S.
Area served Worldwide
Key people Eduardo Tobon
(President & CEO)[1]
Products Charge card, Credit Cards
Website www.dinersclub.com

Diners Club International, founded as Diners Club, is a charge card company formed in 1950 by Frank X. McNamara, Ralph Schneider, and Matty Simmons. When it first emerged, it became the first independent credit card company in the world and established the concept of a self-sufficient company producing credit cards for travel and entertainment.[2] Diners Club International and its franchises service affluent and well-travelled individuals [3] from around the globe, with operations in 59 countries.[4]

Origins[edit]

The idea for Diners Club was conceived at the Major's Cabin Grill restaurant in New York City in 1949.[5] Diners Club cofounder Frank McNamara was dining with clients and realized he had left his wallet in another suit.[6] His wife paid the tab, and McNamara thought of a multipurpose charge card as a way to avoid similar embarrassments in the future.[7] He discussed the idea with the restaurant owner at the table,[8] and the following day with his lawyer Ralph Schneider and friend Alfred Bloomingdale.[8]

McNamara returned to the same restaurant the following February and paid for his meal using a cardboard charge card and a signature.[9][10] The story became well-known[7][11] and is credited by historians as the beginnings of contemporary credit.[12] Various versions of the story differ about whether it was a lunch or dinner at which McNamara forgot his wallet,[7] and whether the bill was paid on loan or McNamara waited for his wife to drive his wallet to him.[13][14] Some journalists later credited Alfred Bloomingdale with the idea for Diners Club.[7]

McNamara and his attorney, Ralph Schneider, founded Diners Club International on February 8, 1950,[15] with $1.5 million in initial capital.[7] Alfred Bloomingdale joined briefly, then started a competing venture in California before merging his California-based Dine and Sign with Diners Club.[11] Diners Club International was named for being a "club of diners" that would allow patrons to settle their bill at the end of each month through their credit account.[16] When the card was first introduced, Diners Club listed 27 participating restaurants, and 200 of the founders' friends and acquaintances used it.[16]

Diners Club had 20,000 members by the end of 1950[17] and 42,000 by the end of 1951.[18] At the time, the company was charging participating establishments seven percent and billed cardholders $5 a year.[19] In 1952, McNamara sold his interest in Diners Club to his partners for $200,000.[20]

The first plastic Diners Club card was introduced in 1961;[21] by the mid-1960s, Diners Club had 1.3 million cardholders.[22]

Diners Club International was later acquired by Citigroup in 1981[23] and by Discover Financial Services in April 2008.[24]

History[edit]

Diners Club's monopoly was short-lived, as American Express and Carte Blanche (which later partnered with Diners Club) began to compete with Diners Club in the travel and entertainment (T&E) card market. American Express now dominates the "member card" arena, providing thousands of customers with cards that require the monthly balance to be paid in full.

Towards the end of the 1960s, Diners Club also faced competition from banks that issued revolving credit cards through BankAmericard (later renamed Visa), and Interbank MasterCharge (later renamed MasterCard). Diners Club began early on to allow franchises of the Diners Club name, at first in Europe and later throughout the world, for many years eclipsing the BankAmericard or Interbank MasterCharge networks abroad. Amoco also issued for a time its own co-branded Diners Club cards called American Torch Club, and Sun Oil Company issued its version called Sun Diner Club Card.

In 1981, Citibank, a unit of Citigroup, acquired Diners Club International, the franchisor that holds rights to the Diners Club trademark, and many of the largest franchises worldwide. A majority of the franchises abroad remain independently owned.


Acquisition by Discover Financial Services[edit]

In a transaction completed July 1, 2008, Discover Financial Services purchased Diners Club International from Citibank for $165 million.[25] The deal was announced in April 2008 and approved by the U.S. government in May 2008. By merging the North American Discover Network with the international Diners Club Network, Discover created a global payment processing system. Discover Bank has no plans to issue Diners Club-branded cards, which continue to be issued by Diners Club International licensees.[citation needed]

In 2011, Discover began putting its logo on Diners Club cards. Some payment processors, like PayPal, can only process new Diners Club cards with the Discover logo on them.[citation needed]

North American franchise[edit]

MasterCard alliance[edit]

In 2004, Diners Club announced an agreement with MasterCard. Diners Club cards issued in the United States and Canada then featured a MasterCard logo and 16-digit account number on the front, and could be used wherever MasterCards were accepted. Cards from other countries continued to bear a 14-digit account number on the front, with the MasterCard logo on the back. However, since the takeover of Diners Club International by Discover Financial Services, these cards have had the Discover logo on the back.[citation needed]

Carte Blanche[edit]

Carte Blanche originated in 1958 as a rebranded Hilton Hotels travel & entertainment card. Hilton sold Carte Blanche to First National City Bank in 1966. Regulatory challenges forced First National City Bank to sell Carte Blanche to Avco in 1968. In 1978, Citicorp (parent company of First National City Bank which was renamed Citibank) would reacquire Carte Blanche without regulatory opposition.[26][27] The 1960s & 1970s-era Carte Blanche card was considered more prestigious worldwide than its competition, the American Express and Diners Club cards, though its small cardmember base hindered its success. Carte Blanche also was the first to implement a "Gold Card" program,[citation needed] but initially only as a means to recognize cardholders who were frequent users and paid their bills on time. In 1981, Citicorp would also acquire the Diners Club card and brand, and by the mid-1990s the Carte Blanche brand was slowly starting to be phased out in favor of Diners Club. Parent company Citigroup (also known as "Citi") was formed in 1998 with the merger of Citicorp and the Travelers Group. Citi issued a premium Diners Club card in 2000, naming it the Diners Club Carte Blanche card. It is an upper-level charge card on par with the American Express Platinum Card. The card carries a US$300 annual fee, offers an extensive menu of perks geared toward spendthrift travelers, and is accepted wherever regular Diners Club cards are accepted. Although Diners Club requires payment in full within 30 days, corporate accounts can pay within 60 days without penalty.[citation needed] By 2005, the classic Carte Blanche card was finally phased out, with only the Diners Club Carte Blanche card remaining.

enRoute[edit]

Diners Club expanded its customer base in Canada by acquiring the enRoute credit card from Air Canada in 1992, and marketed the card under the combined name for a period of time as the "Diners Club/enRoute Card".[28] The enRoute business was valued at over $300 million.[when?][citation needed] Diners Club remains a minor player in Canada.[citation needed]

Acquisition by BMO[edit]

In November 2009, Citibank announced that Diners Club International's North American franchise has been sold to Bank of Montreal (BMO). The deal gives BMO exclusive rights to issue Diners cards in the U.S. and Canada. At the time, BMO said the Diners Club fits well with its existing commercial card business, adding that commercial cards are one of the fastest growing segments in the credit card business.[29]

Russia[edit]

On December 2010, Russian Standard Bank and Diners Club International have entered into an agreement for settlement transactions of the payment system in the Russian Federation. Under the Agreement, Russian Standard Bank will process settlement transactions of other banks acting as acquirers of Diners Club in the Russian Federation.[30]

Switzerland and Germany franchise[edit]

In a transaction that closed on August 6, 2010, Citibank sold the Switzerland and Germany franchises to a private investment group headed by Anthony J. Helbling.[31]

United Kingdom and Ireland franchise[edit]

On August 7, 2012, Citigroup, Inc. announced the sale of its Diners Club franchise in the United Kingdom and Ireland to Affiniture Cards Ltd., a private investor group.[32]

Slovenian scandal[edit]

In 2013, Tomaž Lovše, who owned Diners Club Slovenija, was one of three people investigated in Slovenia regarding unpaid debts that his franchise owed to merchants.[33] In May, the Central Bank of Slovenia revoked the Diners Club Slovenije's license for payment services, which meant 80,000 local members could not use their card.[34][35] Diners Club International transferred the franchise to a subsidiary of Austria's Erste Bank group, Erste Card Club, and agreed to repay the franchise's debt to merchants.[33][36] An Erste press release in August 2013 stated that Diners Club services were once again available in Slovenia.[37]

In popular culture[edit]

In 1963, the film The Man from the Diner's Club was released,[38] and the Ideal Toy Company created the board gamed titled The Diners' Club Credit Card Game.[39][40]

See also[edit]

References[edit]

  1. ^ "Believe Belong Blog". Retrieved June 30, 2013. 
  2. ^ "Diners Club Review". Retrieved 2011-05-26. 
  3. ^ "Diners Club Merchant benefits". 
  4. ^ "Diners Club: Local Sites". 
  5. ^ Pamela Klaffke (1 October 2003). Spree: A Cultural History of Shopping. arsenal pulp press. pp. 23–. ISBN 978-1-55152-143-5. Retrieved 8 February 2013. 
  6. ^ How to Survive & Thrive in the Merchant Services Industry. Survive & Thrive. June 2003. pp. 36–. ISBN 978-0-9741884-0-9. Retrieved 7 January 2013. 
  7. ^ a b c d e David Sparks Evans; Richard Schmalensee (2005). Paying With Plastic: The Digital Revolution In Buying And Borrowing. MIT Press. p. 54. ISBN 978-0-262-55058-1. Retrieved January 7, 2013. 
  8. ^ a b Jonathan Levine (2008). Credit where it is Due: A Social History of Consumer Credit in America. ProQuest. pp. 184–. ISBN 978-0-549-81953-0. Retrieved 8 February 2013. 
  9. ^ Bear, David (November 19, 2006). "Who Deserves the Credit for Credit Cards?". Pittsburgh Post-Gazette. Retrieved February 6, 2013. 
  10. ^ Sherri Liberman (31 August 2011). American Food by the Decades. ABC-CLIO. pp. 131–. ISBN 978-0-313-37698-6. Retrieved 7 January 2013. 
  11. ^ a b Steven P. Schnaars (April 29, 2002). Managing Imitation Strategies. Simon and Schuster. p. 81. ISBN 978-0-7432-4265-3. Retrieved January 7, 2013. 
  12. ^ Louis Hyman (January 12, 2011). Debtor Nation: The History of America in Red Ink. Princeton University Press. pp. 98–. ISBN 978-0-691-14068-1. Retrieved 8 February 2013. 
  13. ^ Steinberg, Neil (March 13, 2000). "The Card that Started it All". Chicago Sun-Times. p. 6. 
  14. ^ Edwin J. C. Sobey (1 March 1999). Young Inventors at Work!: Learning Science by Doing Science. Good Year Books. pp. 100–. ISBN 978-0-673-57735-1. Retrieved 8 February 2013. 
  15. ^ Bryan Roberts; Natalie Berg (3 April 2012). Walmart: Key Insights and Practical Lessons from the World's Largest Retailer. Kogan Page Publishers. pp. 8–. ISBN 978-0-7494-6274-1. Retrieved 7 January 2013. 
  16. ^ a b Michael St. Clair (August 31, 2011). So Much, So Fast, So Little Time: Coming to Terms with Rapid Change and Its Consequences: Coming to Terms with Rapid Change and Its Consequences. ABC-CLIO. p. 88. ISBN 978-0-313-39276-4. Retrieved January 7, 2013. 
  17. ^ Edmund Lindop; Sarah De Capua (September 1, 2009). America in the 1950s. Twenty-First Century Books. pp. 47–. ISBN 978-0-8225-7642-6. Retrieved January 7, 2013. 
  18. ^ Gordon, Marcy. "Credit Card at 50". Associated Press. Retrieved February 8, 2013. 
  19. ^ Boyle, Hal. "How to get a $1,000,000 Idea". Associated Press. Retrieved January 7, 2013. 
  20. ^ Paul Holper; Paul. Inventing Millions. Orient Paperbacks. pp. 58–. ISBN 978-81-222-0458-2. Retrieved February 8, 2013. 
  21. ^ "Diners Club History". Kommersant Money. December 13, 2010. Retrieved February 23, 2013. 
  22. ^ Donald A. Voorhees (October 1, 2004). Why Do Donuts Have Holes?: Fas. Citadel Press. pp. 209–. ISBN 978-0-8065-2551-8. Retrieved February 7, 2013. 
  23. ^ Rome Levine, Daniel (June 20, 2005). "Credit card pact props up Diners". Crain's. 
  24. ^ Stempel, Jonathan (April 7, 2008). "Discover to buy Citigroup's Diners Club". Reuters. Retrieved February 9, 2013. 
  25. ^ Press Release Discover Financial Services Completes Diners Club Acquisition Jul 01, 2008
  26. ^ "Justice Won't Fight Carte Blanche Buy". Associated Press via Pittsburgh Post-Gazette via Google News Archive. 03 April 1978. Retrieved 14 April 2014. 
  27. ^ "Carte Blanche Credit Cards". Montreal Gazette via Google News Archuive. 15 November 1958. Retrieved 14 April 2014. 
  28. ^ COMPANY NEWS; Air Canada Sells Credit Card Unit New York Times
  29. ^ BMO to buy Diners Club franchise (requires subscription)
  30. ^ [1]
  31. ^ Diners Club Press Release Transition of DC Switzerland and DC Germany to New Ownership
  32. ^ "Citi Sheds Diners Club UK Ireland Biz". Community.nasdaq.com. Retrieved 2012-08-20. 
  33. ^ a b Judge Orders Detention for Financial Magnate, STA, September 8, 2013, retrieved September 25, 2013 
  34. ^ "Central Bank Bans Services by Diners Club". The Slovenia Times. May 17, 2013. Retrieved September 24, 2013. 
  35. ^ "Diners Club One Step Closer to Reclaiming Licence". The Slovenia Times. July 5, 2013. Retrieved September 30, 2013. 
  36. ^ "Erste Card Club Collecting Diners Claims". The Slovenia Times. July 23, 2013. Retrieved September 24, 2013. 
  37. ^ "Diners club services enabled again in Slovenia". 
  38. ^ BOSLEY CROWTHER (April 18, 1963). "The Screen: A Slapstick:Kaye in 'The Man From the Diners' Club'". The New York Times. 
  39. ^ Jim Hinckley; Jon G. Robinson (October 6, 2005). The Big Book of Car Culture: The Armchair Guide to Automotive Americana. MotorBooks International. p. 248. ISBN 978-0-7603-1965-9. Retrieved February 7, 2013. 
  40. ^ Douglas J. Goodman; Mirelle Cohen (2004). Consumer Culture: A Reference Handbook. ABC-CLIO. pp. 156–. ISBN 978-1-57607-975-1. Retrieved February 7, 2013. 

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