ACCC failed to fully assess NAB acquiring Diners Club

George Lekakis

National Australia Bank is about to exit Australia’s booming charge card market after notifying customers last week of its timetable to terminate all business and corporate cards issued through its Diners Club subsidiary.
 
The bank acquired the Diners business through its A$1.2 billion acquisition of Citibank's local retail banking assets in July 2022, and its decision to shut down the subsidiary effectively renders American Express as a monopoly provider of charge card services in Australia.
 
NAB’s withdrawal from charge cards has mystified many payments experts given the remarkable growth of the charge card market over the last three years.
 
According to Reserve Bank data, Australia’s two charge card schemes – AMEX and Diners – have increased their combined market share of the credit and charge card market to above 20 per cent from 15.3 per cent in the three years since December 2020.
 
It now appears that the lion’s share of that growth has been won by AMEX, while the underpromoted Diners business has languished.
 
However, the demise of Diners is a significant development because it will help open the way for Mastercard and Visa to reclaim market share in corporate cards – the most profitable segment of the card payments market.
 
According to disclosures made on the Diners Club website, corporate accounts not eligible for rewards points will be automatically terminated on 15 April, while those with rewards points will close on 30 July.
 
Cardholder access to  airport lounges around the country will also cease from 15 April.
 
Payments experts are mostly surprised by NAB’s failure to actively offer Diners’ customers an alternative to their existing corporate or business cards.
 
There are no details of product alternatives on the Diners Club website, which means NAB appears to have marooned most of the cardholders it acquired in 2022.
 
Melbourne-based payments consultant Grant Halverson, who is also a former managing director of the Diners Club business in Australia, described NAB’s decision as staggering.
 
“They haven’t even offered to move charge card holders to a NAB-branded corporate card,” he said.
 
“To not even offer an existing customer another product is astonishing.
 
“It seems an odd tactic.”
 
While a NAB spokesperson said cardholders were able to apply for a NAB card that suited their needs, speculation has been mounting in the payments industry since November that the bank is partnering with Visa to develop a new corporate card.
 
If that is correct the bank needs to explain what motivation it had for including the Diners Club assets in the Citibank purchase.
 
The NAB spokesperson did not furnish any specific reasons for the decision to retire the Diners Club business.
 
“We’re constantly assessing our range of products and services and we may make changes from time to time,” the spokesperson said.
 
NAB’s decision to bury Diners also raises many questions about the thoroughness of the Australian Competition and Consumer Commission’s 2021 inquiry into the market effects of the Citibank sale.
 
When it approved NAB’s purchase of Citi’s banking business in November 2021, the ACCC appeared to exclude the impact on charge card issuance as a factor in its deliberations.
 
For reasons known only to ACCC, the inquiry examined the impact of the acquisition only in relation to credit cards, home loans, deposits, personal loans and investment products.
 
Charge cards were not specifically cited in the regulator’s 2021 announcement even though the ACCC knew that full approval of the acquisition would enable NAB to join a product market duopoly.
 
This looks highly controversial given that it was well known in the local payments sector that NAB had a long term strategic relationship with Visa, which had been losing market share in the corporate cards segment to the charge card providers.
 
“How does the competition regulator feel about having contributed to the formation of a new monopoly in the financial services industry?” Halverson asked.
 
The closure of the corporate charge card business will impact a raft of companies and governments across the country, including Diners Club’s largest customer, the Commonwealth Government.
 
Diners has been providing charge card services to federal government departments and agencies for many years.
 
Under the current service contract, which was extended last year to the end of December 2025, Diners Club and NAB have an obligation to provide card and payments services to the government.
 
The NAB spokesman declined to comment on how the closure of Diners would affect its ability to fulfil its obligations under the government contract.