DECEMBER 2004

Discover Aims to Offer Debit Cards
Through Banks

Another sign of a changing credit card landscape in the wake of court rulings against Visa and MasterCard is Discover Financial Services' acquisition of the Pulse EFT Association. The Pulse PIN debit card network will give Discover the ability to offer banks both debit and credit cards carrying the Discover brand. The deal is expected to be completed by January 2005.

Back in October, a federal court ruling was upheld that struck down long-standing rules imposed by both Visa and Mastercard that prohibited their member banking institutions from issuing other card brands such as Discover and American Express. David Nelms, Discover's chairman and CEO, told the American Banker that the acquisition of the Pulse Network would "immediately add distribution and a substantial base of financial institution customers. . . We think it is very important to be in debit." Discover and Pulse currently charge merchants a lower interchange fee than their Visa and MasterCard competitors, which could attract more merchants to both networks.