Discover Credit Card Aims for the International Market
Discover Financial Services, though competing with the world's largest card networks MasterCard, Visa and American Express, has always been unable to boast of the same large share of the market. This has inspired the company to launch various promotional campaigns which did bring success at least on the national market.
However, the not so general acceptance worldwide as enjoyed by Visa and MasterCard has kept Discover searching for more prospective ways of increasing their customer base and they did find a good one with the help of Citigroup.
As reported on April 7, 2008, Discover credit card signed a contract of purchase with Citigroup and became a full right owner of Diners Club International, extending its services outside North America.
This is the first really significant step towards expanding its business after such smart but not that large-scale campaign as advertising their credit cards in Parents Magazine or issuing Motiva credit card rewarding customers for timely and regular monthly payments.
Forking out $165 million for the purchase, Discover gains access to global presence at last as Diners Club, on a par with Visa and MasterCard, is accepted and processed at more than eight million locations in 185 countries.
The deal promises additional market and greater revenues for Discover company as well as more flexibility and mobility for its customers. Now, Discover credit cardholders will be able to use their plastic at businesses accepting Diners Club cards, which means a lot more opportunities for travelers abroad.
As to Diners Club customers, they won't lose any of their privileges but quite the contrary will get the opportunity to pay at Discover North American network. The mutual profitability of the deal is obvious and the integrity of the two networks is expected to boost not only annual revenues but Discover's significance on the international credit card market.
Citibank credit card business is also looking to be in pocket as a result of the transaction. As head of International Cards Department, Ed Eger, claimed, Citigroup plans to use the millions earned to achieve better management of operations and more efficient business.
Probably the Citigroup management's decision to sell Diners Club business was forced by its credit lossesand turbulence on the stock market that left the company seeking for new money inflows to stay aswim.
This big sale is not the only strategic move of the Citigroup seeking to improve its performance in 2008.Its recently announced reorganization that involves creating regional bank units and global credit and consumer banking organizations also aims at making the company more efficient and restoring its balance sheet after the huge write-offs.