Discover Global Network’s first-quarter results have revealed diverging performances between Diners Club and the Discover’s Network Partners.
Discover counts 25 third-party schemes such as SIBS and RuPay running over Discover rails when cards are used outside their home country. Network Partner volume fell 1% to $10.6 billion which is . the second successive quarter of falling volumes. The company gave little detail and attributed the disappointing result to “lower transaction volumes.” .
Diners Club, which is still largely a series of national franchises, saw a 28% increase in volume, totalling $9.2 billion, driven by improved global travel and entertainment (T&E) and corporate spending. This has been a clear trend since Covid restrictions began to lift.
With new leadership at the helm, I’d expect that Discover will undertake a review of the operations of Discover Global Network. The company has built a worldwide acceptance network with great potential but which, today is rather underutilised.
Discover is the third card brand in the USA, a long way behind Visa and Mastercard, but very profitable nonetheless. Discover bought Diners Club International from Citbank in 2008 which gave it the basis of a global acceptance network.
Diners cards are still issued in various countries by franchise partners. Discover has continued to support the brand by investing in growing its international acceptance network through deals with merchant acquirers and payment gateways. This also gives Discover’s US cardholders the opportunity to use their card abroad. At the same time, the company has partnered with local card schemes so that their customers too can access this worldwide acceptance network. This is an alternative to co-badging domestic cards with Visa or Mastercard for use outside the home country.
Despite the years of investment, payment volumes remain quite modest. Volume from Discover’s network partners was $11.9bn in Q3, up 15% primarily reflecting higher volume at AribaPay. This is a tool that offers simple payments for invoices generated by SAP.
Meanwhile, Diners Club volume is growing rather faster “reflecting an improvement in global travel and entertainments spending.” This was $8.8bn, up 34% in Q3.
Payment volume on Discover’s own cards worldwide was $56.6bn, also up 15%.
Improving conditions for international travel boosted spending on Discover’s Global Network in Q2.
Discover is the third card brand in the USA, a long way behind Visa and Mastercard, but very profitable nonetheless. Discover bought Diners Club International from Citbank in 2008 which gave it the basis of a global acceptance network. Diners cards are still issued in various countries by franchise partners although not so much in Europe these days. For example, the Diners Club franchise partner in Poland recently announced it was exiting the market.
Discover has continued to invest in growing its international acceptance through deals with merchant acquirers and local debit schemes. More than 25 other networks, issuers and fintechs access the DGN rails to give their customers the ability to use their cards internationally. The latest partner is Bancomat which was announced in June 2022. When implemented, this alliance will allow cardholders access to the Bancomat acceptance network in Italy.
Diners volume was up 37% year-on-year in Q2 to $8.4bn “reflecting improvement in global T&E spending.”
Network partners volume was up 22% to $11.5bn “driven by higher AribaPay volume.” AribaPay is a collaboration between SAP and Discover in North America for B2B payments.
Roger Hochschild, CEO, said that he remained “committed to expanding our international merchant coverage… We see a lot of value from the network, not just in the Payment Services segment, but for the differentiation and capabilities it gives our card issuing business, and in particular, the support it provides for rewards on debit, which is a real differentiator in the marketplace.””