Diners Weds MasterCard, JCB Woos Merchants

  The top priority in 2004 for both Diners Club International and the JCB USA division of JCB International Credit Co. Ltd. was the expansion of their respective merchant bases. The companies however, took different approaches to reach their goals.
  By signing with MasterCard International to process its card through the MasterCard network, Diners now is accepted at 24 million merchant locations worldwide. In exchange, Diners agreed to place the MasterCard logo on the face of Diners Club cards in Canada starting last November and on its U.S. cards last month.
  Diners' decision to include its card in the MasterCard network reflects parent Citigroup's allegiance to the MasterCard brand, according to an e-mail interview with M.V. Rajamannar, chairman and chief executive of Diners Club North America. "Since the vast majority of cards issued by Citi in North America are MasterCard cards, it was only natural to consider an alliance with MasterCard," explains Rajamannar. "With this alliance, Diners Club North America remains a key franchise within the Diners Club International network, while positioning the business for top-line growth."
  Observers note, however, that Diners had experienced little growth in recent years because of competition from longtime foe American Express Co. and moves by Visa to expand into cards for the upscale Travel & Entertainment market. Diners would not reveal 2004 charge volume or the number of its cards in force.
  Rajamannar says Diners has no plans to pursue a network relationship with Visa. Citibank began to shift away from Visa to MasterCard several years ago after differences of opinion reportedly arose over branding.
  Los Angeles-based JCB USA decided to deepen relationships with its merchants and repositioned the primary duties of its sales force away from signing merchants to servicing them. JCB's parent has 11.7 million merchant locations worldwide.
  The change was crucial because as merchants switch processors in search of a better discount rate, the new processor inadvertently will drop JCB from its network connection. "Losing a merchant connection hurts our acceptance at the point of sale," says Thomas Wright, JCB USA general manager. "We realized we need to follow up more closely with merchants and take more of a service approach with them to establish reconnections if there is a disconnect after they switch processors."
  New merchant signings typically are handled by merchant-level sales representatives and acquirers. JCB continues to focus on expanding its merchant base in the U.S. to those cities most frequented by Japanese tourists.
  On the cardholder side, JCB continues to work on its cobranded card programs with Japanese supermarkets in California and Hawaii. JCB is leveraging each supermarket's membership card to create a loyalty program tied to its card.
  JCB also has developed a rewards program in which cardholders shopping at select merchants receive a free gift for exceeding a preset spending threshold. The program is cumbersome. Cardholders must contact JCB to obtain a list of the local merchants participating in the program, then turn in their receipts to JCB to obtain the reward. Still, JCB is looking to expand the program by adding a national merchant chain, says Wright.
  Like American Express and Discover, JCB sees future opportunities with card-issuing banks in the U.S. because of recent court rulings allowing MasterCard and Visa members to issue competing card brands, says Wright. "Asia Pacific remains our top market priority, but we certainly feel there is future opportunity with banks," he says. "Right now, that is more of a long-term prospect."
  JCB has positioned itself to get a fast start if and when smart cards move from being a niche product in the U.S. by joining the EMV Co., an alliance of Eurocard International, MasterCard and Visa to create a single, international smart card standard. "This is more of a global move, but we want to be ready to utilize the smart card when it takes off in the U.S." says Wright.
  JCB also expanded its contactless payment programs in Japan, rolling out the Mobile Offica suite with NTT DoCoMo, the Japanese mobile communications company. The suite includes a cell phone, watch and identification card, all outfitted with computer chips that offer payment functionality along with building access.
  JCB AND DINERS CLUB
  (charge volume in $ billions, cardholders and merchant locations in millions)
   2004 2003
  JCB*
  Charge Volume $52 $43
  Merchant Locations 11.7 10.9
  Cardholders 51.6 48.4
  Diners Club**
  Charge Volume $30 $30
  Merchant Locations 24 7
  Cardholders 8 8
  Notes: Worldwide figures. *For fiscal years ended March 30 of noted year. **CCM year-end estimates.
  Source: JCB Co. Ltd., CCM.