Discover Card
The Discover Card is a major credit card, issued primarily in the United States. It was originally introduced by Sears in 1985, and was part of Dean Witter, and then Morgan Stanley, until 2007, when Discover Financial Services became an independent company. Novus, a major processing center, used to be partners with the company as well. The Novus logo has since been retired and now the Discover Network logo has replaced it.
Most cards with the Discover brand are issued by Discover Bank. Discover Card transactions are processed through the Discover Network payment network. As of February 2006, the company announced that it would begin offering Discover Debit cards to banks, made possible by the Pulse payment system, which Discover acquired in 2005.[1]
History
At the time the Discover Card was introduced, Sears was the largest retailer in the United States. It had purchased the Dean Witter Reynolds Organization (brokerage) and Coldwell, Banker & Company (real estate) in 1981[2] as an attempt to add financial services to its portfolio of customer services. Together with the Discover Card (and its issuing bank, the Greenwood Trust Company, owned by Sears), this was named the Sears Financial Network. Early Discover Cards bore a small embossed symbol representing the Willis Tower, the company's headquarters at the time.
Unlike other attempts at creating a credit card to rival MasterCard and VISA, such as Citibank's Choice card, the Discover Card quickly gained a large national consumer base. It carried no annual fee, which was uncommon at the time, and offered a typically higher credit limit than similar cards. Cardholders could earn a "Cashback Bonus," in which a percentage of the amount spent would be refunded to the account (originally 2%, now as high as 5%), depending on how much the card was used. Retailers [who?] were wooed by merchant fees significantly lower[citation needed] than those of other widely-accepted credit cards. The Discover Card was also noteworthy for being the only credit card accepted by the U.S. Customs Service to pay customs duty. [citation needed]
However, the plan to create a one-stop financial-services center in Sears stores was not as successful as Sears had hoped, and its promotion of the Discover Card was thought both to hurt Sears turnover and to restrict the card's potential. Other retailers resisted it, as they believed they would be helping their competitor.
In light of these developments, and of strong competition both from Wal-Mart and from so-called category killers such as Toys "R" Us, Sears began to face difficulties in the late 1980s. Sears sold its financial businesses in 1993, and began to accept MasterCard and Visa in addition to its store credit card and the Discover Card. The Discover Card became part of the Dean Witter financial services firm. Dean Witter Discover merged with Morgan Stanley in 1997. In 2000, Greenwood Trust changed its name to Discover Bank.
Discover Card had a sign located on the top of One Times Square below the flagpole which drops the New Year's ball until late 2007. It displayed information and new offers for the company and also displayed the countdown during the New Year's celebrations.
Business developments
In October 2004, the Supreme Court upheld a ruling in Discover Card's favor that challenged exclusionary policies of Visa and MasterCard. Before this ruling, Visa and MasterCard would not allow banks to issue a Discover Card if they issued a Visa or MasterCard. Within days of the court ruling, Discover Card filed a lawsuit in federal court seeking damages from Visa and MasterCard. In 2005, Discover Card acquired PULSE, an electronic funds transfer association, allowing it to issue and market debit and ATM cards.
Shortly after the 2004 Supreme Court ruling, Discover also struck its first deal to have its card issued by another bank, GE Consumer Finance, which now issues three cards for retailer Wal-Mart and its wholesale warehouse stores, Sam's Club; transactions for both cards are processed on the Discover Network. Sam's Club exclusively accepted Discover Card for many years, although, since November 2006, it has also accepted MasterCard for purchases.
HSBC has also issued credit cards processed through the Discover Network, and branded with the Discover logo, since its acquisition of card issuer Metris in late 2005. Metris had originally signed an agreement with Discover in September 2005, only three months prior to the HSBC acquisition.
Morgan Stanley was long thought to want to sell the Discover Card business, and in April 2005, it announced that it would divest Discover Financial Services as an independent company within six months. However, by June industry sources reported that Morgan Stanley was reassessing its plan to spin off Discover. Finally, in August 2005, the company confirmed it would not sell Discover. In yet another reversal, in December 2006, Morgan Stanley announced it would, again, spin off Discover as a standalone company by the end of August 2007. The spin-off was finalized ahead of schedule, on June 30, 2007.
Brand acceptance
Discover Card has over 50 million cardmembers and the Discover Network has more than 4 million merchant and cash access locations. The Pulse automatic teller machine (ATM) network currently serves more than 4,500 banks, credit unions, and savings institutions. However, unlike its competitors, the Discover Card is neither issued nor widely accepted outside the U.S., although it can be used to obtain cash from ATM locations worldwide. Owing to its heritage at Sears, an additional benefit of the Discover Card is the ability to make payments on the account, in person, at participating Sears stores.
In Canada, Discover brand cards are accepted at few locations, usually at businesses catering to American tourists, such as car rental agencies and hotels, as well as major American merchants like Sears and Wal-Mart. Some Canadian businesses do accept Discover cards but opt to favor Visa, Mastercard, American Express and Interac. ATM service offered by Discover is not currently available in Canada, although cardmembers apparently could access cash at any Sears Canada store. [3]
In the United Kingdom, Discover issued credit cards on the MasterCard network under both the Morgan Stanley and Goldfish brands since 1999, with the Goldfish brand being purchased from Lloyds TSB in 2005[4]. The entire business was sold to Barclays on February 7, 2008. These cards have since been rebranded as Barclaycard Goldfish and Barclaycard Platinum respectively.
While Discover brand cards are not currently accepted in Europe, the company's presence continues to grow in Mexico, Costa Rica, Micronesia, the Marshall Islands, Belize, Palau, and many of the Caribbean Island nations. The corporate web site FAQ section http://www.discovercard.com/customer-service/faq/international.html describes specifically where the Discover Card is accepted outside the United States.
Additionally, in May 2005 Discover Network announced an alliance with China UnionPay Network. The two companies have signed a long-term agreement that will lead to acceptance of Discover Network brand cards at UnionPay ATMs and point-of-sale terminals in China and acceptance of China UnionPay cards on the PULSE network in the U.S. CUP cards have been accepted in the US since December 2005, and Discover Cards have been accepted in China since November 8, 2006.[5] This partnership makes Discover Card the most widely accepted American card in China, beating out competitors Visa, MasterCard, and American Express. Neither Discover Financial Services nor China UnionPay have stated whether there had any plans to eventually expand acceptance to the other nations where the CUP network is in place, i.e., the Philippines, Singapore, Thailand, Vietnam, and South Korea.
A similar agreement was made in August 2006, when the Discover Network announced an alliance with Japan’s JCB Network.[6] JCB Cards will be accepted on the Discover Network in the United States, Puerto Rico, Guam and Northern Mariana Islands starting October 12, 2007 and Discover Card will be accepted on the JCB Network in Japan in early 2008[7].
On August 24, 2006, Discover’s PULSE network and the UK’s LINK ATM network announced a reciprocal agreement that will allow the more than 4,500 financial institution participants in the PULSE network to offer their cardholders access to all but a handful of the more than 58,000 cash machines across the UK and allow LINK to offer its 38 participating financial institution members access to more than 265,000 PULSE cash machines in the United States.[8]
In December 2009, an agreement was formalized with Brazilian credit-card processor Redecard to begin accepting Discover Card in Brazil. [9]
Discover acquires Diners Club
In April 2008, Discover Financial Services and Citigroup announced that Discover was purchasing the Diners Club network from Citi for $165 million. In May 2008, the Federal Trade Commission approved the transaction. The deal was completed on July 1, 2008. [10] Discover stated that the Diners Club network, which is a major network outside North America, will be merged with the Discover Network, a major network in North America, creating an international network for Discover Network cards and Diners Club cards. Diners Club cards will continue to be issued by Diners Club International licensees, including Citibank. Discover Bank has no plans on issuing Diners Club branded cards itself. Discover only purchased the network, and not the licensees issuing the cards.
References
- ^ "Merger of Discover Financial Services and Pulse EFT Association closes following Pulse member approval" (Press release). Discover Financial Services. 2005-01-12. Retrieved 2007-10-22.
- ^ "A Brief Chronology of Sears History". Sears Brands, LLC. Retrieved 2009-08-12.
- ^ Where can I obtain a cash advance in Canada using my card?
- ^ Discover Financial Services acquires the UK's Goldfish
- ^ Discover Financial Services and China Unionpay Launch Second Phase of Reciprocal Acceptance Agreement
- ^ Discover Financial Services and JCB Announce Alliance
- ^ Cards Accepted in the United States
- ^ PULSE and LINK Networks Sign Reciprocal ATM/Cash Machine Agreement
- ^ "Brazil's Redecard In Pact To Handle Discover Card Transactions". December 23, 2009.
- ^ Miller, James P. (2008-07-01). ""Discover completes purchase of Diners Club"". Chicago Tribune. Retrieved 2008-07-01.