Bank of Montreal's Ambitious Growth Strategy for Diners Club Cards

Out of the ashes of the old Diner's Club card - the first widely-used credit card, which was introduced in February 1950 and most recently owned by Citi - is emerging, phoenix-like, a corporate card business at Bank of Montreal that is currently the fifth largest in the world. Terry Wellesley, executive managing director and group head of BMO spend and payment solutions, stopped by this afternoon at the start of an eight-week North American tour, to tell us a bit about his group's climb from #12 to #5, and of course, its ambitions to be #1.Bank of Montreal completed its acquisition of Diners Club on December 31st, 2009. The acquisition is so new, in fact, that the Diners Club website's "About" page still lists Citigroup as its owner. But the credit crisis forced Citi to withdraw support for and finally divest the card unit. Wellesley, who had worked at Citi several years ago and knew the strengths of the Diners Club unit - it's one of the few card brands that is able to function multinationally, for one thing - saw opportunity and snapped it up.

Corporate travel is in decline, Wellesley acknowledges, as companies continue to restrict travel and use more videoconferencing to conduct long-distance meetings. In fact, travel expenses are down 25%-30% at Bank of Montreal itself, and Wellesley has become stricter about the expenses he approves for his reports. So new growth comes about through new corporate signings, hence the North American tour (the bank serves U.S. companies through Harris Bank, a Chicago-based wholly owned subsidiary).

What Bank of Montreal is emphasizing in its corporate card strategy is "surround systems" - technology and information to help businesses manage and reduce travel expenses. The bank offers software that lets executives analyze travel and procurement expenses to trim any excesses or inefficiencies and negotiate rebates - for instance, if employees are staying frequently at a particular hotel chain, the company should be able to negotiate a discount with that chain. The bank's software works with Ariba spend management software that lets clients automate purchase order, invoice receipt, invoice reconciliation and settlement processes; it also works with travel expense software such as Concur and TravelMaster and ERP software including PeopleSoft and SAP. In addition, the card unit has a consulting group trained to analyze and improve companies' travel and expense processes to save money.

One strength Canuck card programs such as Bank of Montreal's have is embedded computer chips. While chip cards have not been adopted broadly yet in the U.S., Canada began a national rollout of chip-enabled cards in 2008 that will be 65% complete by the end of 2010; by 2015, there will be no magnetic stripes on Canadian cards at all. So-called "chip and PIN" protected cards are believed to be much more secure than magnetic stripe cards, which are easier to duplicate (although the cards still have magnetic strips as well, to accommodate the many merchant terminals that have yet to accept chips). "Chip is one way of slowing down credit card fraud," Wellesley says. "But anything we're deploying today, fraudsters will eventually figure out."