Discover Card

From Wikipedia, the free encyclopedia

Discover Financial Services, LLC

Type	Subsidiary
Founded	1985, introduced by Sears
Headquarters	Riverwoods, Illinois
Key people	David W. Nelms, Chairman and CEO
Industry	Financial Services
Products	Discover Card, credit card
Employees	14,000
Parent	Morgan Stanley
Website	discovercard.com

Discover Card is a credit card issued primarily in the United States, with 50 million cardholders. The Discover Card was originally introduced by Sears in 1985, and is today operated as a subsidiary of Morgan Stanley. Discover is headquartered in Riverwoods, Illinois.

Most cards with the Discover Card brand are issued by Discover Bank, which also offers savings products and home loans. Discover Card transactions are processed through the Discover Network payment network. As of February 2006, Discover Debit cards are now capable of being supported on the Discover Network, powered by PULSE, which Discover acquired in 2004.

1 History
2 Developments
3 Brand Acceptance
4 External links

[edit] History

Discover/Novus card-acceptance symbol as it appeared in the 1990s

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, as an attempt to add financial services to its portfolio of customer services. Together with the Discover Card, this was named the "Sears Financial Network." Early Discover Cards bore a small embossed symbol representing the Sears 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, which was test-marketed prior to the introduction of the Discover Card but reissued as a Visa card in late 1987, 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 (as high as 1%), depending on how much the card was used. The Discover Card was also noteworthy for being the only credit card accepted by the U.S. Customs Service to pay customs duty.

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. After Discover was introduced, Sears stopped accepting competing credit cards, alienating customers and adversely affecting sales.

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 again. The Discover Card became part of the Dean Witter financial services firm. Dean Witter Discover merged with Morgan Stanley in 1997.

Discover Card also has a sign located on the top of One Times Square below the flagpole which drops the New Year's ball. It displays information and new offers for the company and also displays the countdown during the New Year celebration.

[edit] Developments

The Discover Classic Card

In October of 2004, the Supreme Court upheld a ruling in Discover Card's favor, that challeged exclusionary policies of Visa and MasterCard. In 2005, Discover Card acquired PULSE, an EFT association, allowing it to issue and market debit and ATM cards. 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. It 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. Until November 9th, 2006 when MasterCard was added to their list of payment options, Sam's Club accepted no credit cards other than those issued on the Discover Network.

Metris Companies announced in September 2005 that they signed a definitive agreement under which Metris will launch a credit card on the Discover Network; three months later, Metris was acquired by banking giant HSBC. On November 1, 2005 Discover Network and Purpose Solutions, LLC, a subsidiary of CompuCredit Corporation primarily known for issuing the Aspire Visa, announced that Purpose Solutions will issue a card on the Discover Network.

Morgan Stanley was long thought to want to sell the Discover Card, 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 its Discover Card operation. Finally, in August, the company confirmed it would not sell Discover.

In 2005, Discover dropped its agency of record, and hired another.

[edit] Brand Acceptance

The Discover 2Go card

Discover Card has over 50 million cardmembers and the Discover Network has more than 4 million merchant and cash access locations. The Pulse ATM network currently serves more than 4,100 banks, credit unions, and savings institutions. However, unlike its competitors, the Discover Card is not issued nor widely accepted outside the U.S., although it can be used to obtain cash from ATM locations worldwide.

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 American Eagle Outfitters. Some Canadian businesses do accept Discover cards but opt to favour Visa, Mastercard and American Express. ATM service is not currently available in Canada although cardmembers apparently could access cash at any Sears Canada store.

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.

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. This partnership, with the network expected to be fully operational by Fall 2006, will make 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 are any plans to eventually expand acceptance to the other nations where the CUP network is in place, i.e. Singapore, Thailand, and South Korea. A similar agreement was made in August, 2006, when the Discover Network announced an alliance with Japan’s JCB Network.

Also in August of 2006, Discover’s PULSE network and the UK’s LINK ATM network announced a reciprocal agreement that will allow the 4,200 financial institution participants in the PULSE ATM/debit 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 an additional 250,000 PULSE cash machines in the United States.

Discover Financial Services, LLC also issues credit cards on the MasterCard network under its parent company's name, Morgan Stanley, in the United Kingdom.