In a bid to grow global acceptance of its branded credit card and payments network business, Discover Financial Services will buy Diners Club International. The acquisition is expected to close within 90 days.
With the $165 million purchase from Citigroup Inc., Discover will become the owner of the Diners Club payment network, brand and license agreements. Citigroup, along with more than 40 other licensees, will continue to issue Diners Club cards. Discover will not issue the cards.
“Part of Discover’s core business strategy is to broaden acceptance, grow our payments business and continue to strengthen the Discover card in the market,” said Harit Talwar, EVP at Discover Financial Services and manager of the Discover network. “Each one of these three things is impacted by this transaction.”
Talwar expects full integration of Discover and Diners Club to take two to three years. Once the integration is complete, Discover cardholders will be able to use their cards at the 8 million Diners Club locations worldwide. Likewise, Diners Club cards can be used wherever Discover cards are accepted.
Such a trade-off should benefit both companies, with more merchant partners accepting each card and increasing Discover card spend outside its traditional North American range. Diners Club reports more than $30 billion per year in spend volume outside of North America.
“Third-party banks in the US who issue on our network find more value by issuing on a network that has international acceptance, so this helps our payments business,” Talwar continued. “It also helps our own proprietary card issuing business because some customers spend a lot and travel, but they could use Discover only in the US. Now they can use their Discover Card globally, so it helps drive revenues and profits of our domestic proprietary card issuing business.”
Citi execs, too, appear happy with the deal. Selling off Diners Club, but maintaining its license to distribute the cards, fits with the company’s strategy of focusing on its card-issuing business.
Talwar said his top priority now is to build interoperability between the two networks, and to communicate with consumers through “smart branding and marketing.” He said Discover will also be working closely with Diners Club franchisees, investing more in the brand, product and customer features to spur growth in local markets.
“We think the Discover brand is strong in the US, and we think the Diners Club brand is strong internationally,” Talwar concluded. “Therefore, both are very complementary. Notwithstanding current economic trends, travel is becoming more common, and, therefore, having an international network is going to help us more.”
