Diners Club leaves Citi and the country, finding a new home in Canada

On February 8, 1950, Frank McNamara and Ralph Schneider finished their dinner at Major's Cabin Grill in New York and did something that had never been done: they paid with a charge card. The two men, along with colleague Matty Simmons, were the creators of Diners Club, the first charge card that could be used at multiple restaurants and retailers. Like their later competitor American Express (AXP), Diners Club balances had to be paid in full at the end of the month, but the ease of credit purchases opened the door to innovations like credit cards.

Now, almost 60 years later, the trailblazer for America's credit industry is leaving the country. Citigroup (C), which bought Diners Club in 1981, has announced plans to sell the company's North American operations to the Bank of Montreal (BMO). It has already gotten rid of worldwide operations, having sold them to Discover (DFS) last year.
The sale, which analysts expect to close before the end of March, is part of Citigroup's move to get rid of divisions unrelated to its core banking operations. It follows in the footsteps of last week's $1 billion sale of Bellsystem24. For Bank of Montreal, it translates into net receivables of $1 billion, and $7.8 billion in card transactions. BMO will also be the sole issuer of Diners Club cards in the U.S. and Canada.

There's a certain poignancy to the sale, but the sad truth is that Diners Club hasn't been relevant for years. While its 2004 agreement with MasterCard means that Diners can be used in any store that accepts MasterCard, most consumers are still less likely to use it, given that cardholders must pay off their entire balance at the end of each month. Even the move toward greater financial responsibility among cardholders probably won't help the brand -- American Express covers much the same territory and has far stronger brand awareness.

Truth be told, Diners Club's greatest value may lie in its piecemeal cannibalization and sale. With Discover using it to gain a worldwide network, and BMO using it to expand its North American presence, Diners Club's relevance now may lie solely in its ability to nourish the industry it once dominated.
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