Diners Club North America this year entered into an acceptance alliance with MasterCard International, boosting the number of worldwide merchants that accept the card from 8.3 million to 22 million. This month, chairman and CEO M.V. Rajamannar, who in April took the helm of the T&E payment vendor, discussed with BTN editor Jay Boehmer the rollout of the modified Diners Club cards to begin next month.
BTN: What are the next steps that Diners Club will take to roll out new cards that leverage MasterCard's acceptance?
M.V. Rajamannar: In November, the Canadian card will move onto the new method of acceptance. By year-end, we will start to board our new corporate customers within the United States. For all the existing customers in the U.S., we will start moving them onto the enhanced cards in a phased manner immediately thereafter. We hope that, by the middle of next year, everyone will be transitioned to the card. The Diners Club card will retain all of its original properties. All we're doing is entering into an acceptance alliance with MasterCard. The Diners Club card will not change; the way it's accepted is the only thing that will change.
BTN: If a merchant accepts MasterCard, but not Diners Club, how would the transaction be processed through the new Diners Club card?
Rajamannar: Within North America, the cards, which so far have had a 14-digit account number, now will carry a 16-digit account number. It will also carry the MasterCard logo and hologram on the front of the card, so it will be accepted at all MasterCard-accepting outlets. When the cards go through a MasterCard merchant, from a technology perspective, the acceptance process is identical to what a MasterCard transaction is like.
BTN: Will travel managers be able to access all spending information and corporate card reporting through Diners Club's reporting platform?
Rajamannar: Exactly the same thing will continue with the MasterCard relationship. It will be a seamless transition, and the customer will not see any difference. We do have some interesting solutions out there, and we are acutely aware and conscious of the fact that MIS is one of the key drivers in the corporate card industry. From a corporate customer's point of view, there should not be any dilution of our MIS capability. That's exactly what we have plans in place to ensure, through the MasterCard network itself and augmented data capturing. Today, the travel manager has our data-reporting tool, Global Vision. We also have the Customer Account Management tool to enable the travel manager to manage accounts. One is a Web-based tool; the other is a desktop tool. Both of these, in conjunction, will give to the customer all MIS capabilities.
BTN: MasterCard has been actively negotiating with hotel companies to pass along electronic hotel folio data. If customers are using the Diners Club card, and a transaction is being processed through a MasterCard merchant, can it be passed along to your corporate customers?
Rajamannar: Yes. It absolutely can. That's one component of our data gathering, but we also have other mechanisms in place that will ensure that the data richness, which we offer today to our customers, is protected.
BTN: Will there be cross-marketing or client referral partnerships with MasterCard?
Rajamannar: This is basically an acceptance alliance. Going forward, we may have to explore other possibilities that customers can gain from. Until then, it's just an acceptance agreement that we have with them.
BTN: Do you consider MasterCard to be a competitor or a partner?
Rajamannar: For Diners, they are going to be a partner, as they have been to Citibank. We are not competing; we are collaborating. That only strengthens the organizations. For Diners, it certainly gives me and my customers the enhanced acceptance network. For MasterCard, it provides incremental volume through their network. From the customer's point of view, they get all the things Diners Club offers, but with much greater acceptance. For all the parties involved, it's a win-win-win.
BTN: Can rewards be earned through purchases that are processed by MasterCard?
Rajamannar: Absolutely. Club Rewards is a key and a really motivating component of Diners Club, even on the corporate side. This has been one of our strengths, and we've been investing a lot of time, effort, money, partnerships and relationships around that.
BTN: Do you see any trends in how companies manage rewards programs?
Rajamannar: We see a good mix. There are companies, for example, that want more cash rewards, there are companies that look at it as a benefit to their employees and other companies want centralized rewards to go back to the company itself. There are companies that say, 'If you do something on the pricing, I don't want any rewards.' There is not a clear direction of where movement is. We've got a good mix of all types, and that is something we take into account when we ask, 'Are we able to adequately compete and sustain a competitive advantage with the rest of the folks out there in the marketplace?'
BTN: Many card issuers have said there is more opportunity for growth in purchasing, as opposed to in T&E cards. Will Diners Club go after that market?
Rajamannar: You're absolutely right. The industry is evolving and new products are coming, especially in the purchasing area. Citibank does have a purchasing card, which I believe is the largest in the world today. Diners today is in the travel and entertainment space. Going forward, we have to keep satisfying all the needs of customers, and evolving and building products that are market-appropriate. I would not exclude it at all. My first priority is to make sure we have this transition happening on the enhanced card, and the new acceptance mechanism is a flawless and seamless transition. Then we'll look at further opportunities for growth.
BTN: Would you refer a customer looking for a purchasing card to Citibank?
Rajamannar: Absolutely. Without any question. In any multi-product company there's the realization that there are multiple segments out there, and each segment would have a very different set of needs. As a corporation, Citigroup offers a suite of products, so for any need, in any segment, they won't have to go beyond the corporation. That's the fundamental approach that's true for Citigroup.
BTN: The U.S. Supreme Court let stand a ruling that mandated Visa and MasterCard allow their bank issuers to partner with American Express or Discover cards
(BTN, Oct. 18). Do you expect this to have any ripples in the corporate card market?
Rajamannar: From the American Express and Discover point of view, this allows them to get more distribution channels. The product itself doesn't fundamentally change. From a Diners perspective, this doesn't impact us in any way. It is actually on the product bundle superiority that we are going to compete in the marketplace. In the corporate space, the key things that we compete on are rewards, MIS and service. None of this is impacted by the decision of the U.S. Supreme Court. Our product will be in top form with the acceptance enhancement very shortly, and we have solid distribution already in place. The acceptance is going to be much bigger. If you look at industry statistics, MasterCard provides us with access to a substantially higher number of merchants than either American Express or Discover.