Diners Club International

I have an intense interest in business case studies, the discussion of first movers, early adapters and followers frequently comes up in such discussions. The first credit charge card was Diners Club International; despite their early success as a first mover, they are now pretty much obsolete in Australia.

Diners Club is a pretty good example of a first mover, an innovator that has been left behind in a marketplace dominated by American Express; a competing charge card plus Visa and Mastercard, the leading consumer credit cards. Being first to market doesn't necessarily ensure success; indeed, later adaption does hold a number of distinct advantages.

Then there is the rapidly expanding credit card business model with Visa, Mastercard and American Express issuing credit cards via retail department stores like Myer and David Jones, airlines like Qantas and Singapore Airlines, department stores like Coles and Woolworths and car manufacturers like Holden and Ford. These cards are linked to reward programs allowing consumers to redeem points at department stores, airlines and specialty stores among other things.

Some history, as the story goes, Frank McNamara was out to dinner with his wife, much to his embarrassment, he left his wallet in a different suit pocket and his wife had to pay the bill on his behalf. The next day he discussed his credit idea with the restaurant owner, between them, they came up with a charge card and account; within months, he had nearly 30 restaurants on the books.

The company was appropriately named The Diners Club; later, this name would alienate potential clients. The business indeed went international with vendors in Europe, Asia, South America, Australia and Africa adapting the Diners Club business model. I recall my father having a Diners Club charge card throughout the 1970s and into the 80s, these days his card of choice is Visa.

So, Diners Club International was a charge card; that is, credit may be accrued over the course of a month, however, the account total must be settled at the end of each month. A pretty fair deal, if you don't live beyond your means. Changes in attitude to personal debt saw rapid growth in consumer credit. Paying off a credit card bill every month suddenly seemed uncool, accumulating short-term debt long-term at unsecured rates of interest was suddenly very much in vogue.

The major competitor of Diners Club in the United States was American Express, running a similar charge card business model. A number of factors contributed to the dominance of American Express; these are, a concentrated marketing campaign explaining to consumers to "don't leave home without one" with the American name on the card with the green representing American greenback banknote colour.

The rise of consumer credit has left the Diners Club International business somewhat exposed, the charge card model does not allow the continued accumulation of debt. Consumers don't seem concerned with ballooning credit card debt, minimum monthly repayments, increasing debt limits and decreased abilities to make repayments in this consumer orientated economy. The name confuses consumers believing the card can only be used in restaurants and not as a general charge card, after all, a Visa or Mastercard is now accepted in all restaurants almost without exception.

Acceptance of Diners Club International at retailers is low due to misconceptions over the name with finally the fee structure on similar levels to rival Amex but higher than competitors Mastercard and Visa. Amex has sought to reinvent itself with a strong rewards program, credit cards and finally a debit card. Diners Club International might still have a decal on the glass at selected vendors alongside the Visa, Mastercard, JCB, Discover and Amex decals. Despite being the architect of the charge card, their span of control and market share, Diners Club International is pretty much limited to a decal on shop windows these days.