As difficult as it was for Diners Club to overcome all of these obstacles, its most serious challenge would come from competitors within the credit card field. Throughout most of the 1950s, it had the field almost entirely to itself, with the exception of a number of smaller bank credit card operations. In 1958, Diners Club’s position changed dramatically with the advent of two formidable competitors, American Express and Carte Blanche.
American Express had decided to enter the credit card business mostly as a hedge against possible inroads the industry might make into the lucrative traveler’s check business. The traveler’s check had been invented in 1890 by Marcellus Fleming Barry, an employee of the American Express Company. Barry had developed the traveler’s check in response to a challenge from the head of American Express, J. C. Fargo, to solve the problem of cashing personal checks while abroad. Barry’s innovation of putting a line at the top of a check to be signed at the time of purchase and a line at the bottom for the comparison signature when the check was cashed was copyrighted in 1891 and has survived relatively unchanged to this day.
Survival, however, was very much a concern at American Express when, after studying the credit card business for several years, it issued its first credit card on I October 1958. Its first year of operation ended with some 32,000 establishments accepting the cards and more than 475,000 cardholders signed up. In large part, its initial success was due to its takeover of the Universal Travel Card issued by the American Hotel Association. However, by the early 1960s, the growing dominance of American Express in the T&E field was more directly related to its existing international connections through its traveler’s check operations and, perhaps more importantly, the enormous financial resources that it could draw upon to support its marketing and financial operations. These resources far surpassed those of either of its two rivals.
Carte Blanche, the second major entrant into the T&E credit card field, was originally the private credit card of the Hilton Hotel Corporation. Founded as a separate entity in 1958, it was sold in 1965 to the FNCB Services Corporation, a subsidiary of the First National City Bank of New York (later Citibank). In response to a suit filed by the antitrust division of the Justice Department, the First National City Bank agreed to run Carte Blanche as an independent corporation. In April 1968, control of Carte Blanche was sold to the Avco Corporation, which bought 51 percent of the outstanding shares from First National City Bank. In December 1969, the remaining shares were purchased from the Hilton Hotels.
Following the limited efforts by the Flatbush National Bank and the Paterson Savings and Trust Company to establish community credit plans, a number of other banks, such as the Franklin National Bank of New York, entered the credit card field on a limited basis. By 1955, there were more than 100 banks with credit card plans. Most were smaller operations, however, because larger banks were still reluctant to enter into this as yet unproven field.