The
Discover Card is a major
credit cardA credit card is part of a system of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services...
, issued primarily in the
United StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
. It was originally introduced by
SearsSears, officially named Sears, Roebuck and Co., is an American mid-range chain of international department stores which was founded by Richard Warren Sears and Alvah Roebuck in the late 19th century...
in 1985, and was part of
Dean WitterDean Witter Reynolds was an American stock brokerage catering to the middle class. In 1997, it merged with the Morgan Stanley Group to form Morgan Stanley Dean Witter...
, and then
Morgan StanleyMorgan Stanley is a global financial services provider headquartered in New York City, New York, United States. It serves a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 33 countries around the world with 600 offices, with...
, until 2007, when
Discover Financial ServicesDiscover Financial Services is an American financial services company, which issues the Discover Card and operates the Discover and Pulse networks...
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 networkA payment system is a system used to settle financial transactions in Automated teller machine networks, Stored-value card networks, bond markets, currency markets, and futures, derivatives, or options markets, or to transfer funds between financial institutions...
. As of February 2006, the company announced that it would begin offering Discover Debit
cardsA debit card is a plastic card that provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic cheque, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card...
to banks, made possible by the
PulseFor other uses, see Pulse Pulse is an interbank electronic funds transfer network in the United States. It serves more than 4,500 U.S...
payment system, which Discover acquired in 2005.
History
At the time the Discover Card was introduced, Sears was the largest retailer in the United States. It had purchased the
Dean Witter ReynoldsDean Witter Reynolds was an American stock brokerage catering to the middle class. In 1997, it merged with the Morgan Stanley Group to form Morgan Stanley Dean Witter...
Organization (brokerage) and
Coldwell, Banker & CompanyColdwell Banker is a large real estate franchise owned by Realogy, which also owns Century 21 Real Estate and ERA Real Estate. The company was founded in 1906 in San Francisco....
(real estate) in 1981 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
Sears TowerWillis Tower, formerly named Sears Tower, is a 108-story skyscraper in Chicago, Illinois. At the time of its completion in 1973 it was the tallest building in the world, surpassing the World Trade Center towers in New York...
, the company's headquarters at the time.
Unlike other attempts at creating a credit card to rival
MasterCardMasterCard Worldwide is a multinational corporation based in Purchase, New York, United States. Throughout the world, its principal business is to process payments between the banks of merchants and the banks of purchasers that use its "MasterCard" brand debit and credit cards to make purchases....
and
VISAVisa Inc. , commonly referred to as VISA , is a multinational corporation based in San Francisco, California, USA. The company operates the world's largest retail electronic payment network, managing payments among financial institutions, merchants, consumers, businesses and government entities...
, such as
CitibankCitibank is a major international bank, founded in 1812 as the City Bank of New York, later First National City Bank of New York. Citibank is now the consumer banking arm of financial services giant Citigroup, one of the largest companies in the world...
's
Choice cardChoice was a credit card test marketed by Citibank in the United States, announced in 1977 and first issued in 1978. It was one of the first cards to offer a cash-refund program and no annual fee. Choice was intended to create a rival to Visa, MasterCard, and American Express, but proved...
, 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 were wooed by merchant fees significantly lower 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.
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-MartWal-Mart Stores, Inc. is an American public corporation that runs a chain of large, discount department stores. It is the world's largest public corporation by revenue, according to the 2008 Fortune Global 500. The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and...
and from so-called
category killerCategory killer is a term used in marketing and strategic management to describe a product, service, brand, or company that has such a distinct sustainable competitive advantage that competing firms find it almost impossible to operate profitably in that industry. The existence of a category killer...
s 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 CourtThe Supreme Court of the United States is the highest judicial body in the United States, and leads the federal judiciary. It consists of the Chief Justice of the United States and eight Associate Justices, who are nominated by the President and confirmed with the "advice and consent" of the Senate...
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
PULSEFor other uses, see Pulse Pulse is an interbank electronic funds transfer network in the United States. It serves more than 4,500 U.S...
, an
electronic funds transferElectronic funds transfer or EFT refers to the computer-based systems used to perform financial transactions electronically.The term is used for a number of different concepts:...
association, allowing it to issue and market debit and ATM cards.
Shortly after the 2004
Supreme CourtThe Supreme Court of the United States is the highest judicial body in the United States, and leads the federal judiciary. It consists of the Chief Justice of the United States and eight Associate Justices, who are nominated by the President and confirmed with the "advice and consent" of the Senate...
ruling, Discover also struck its first deal to have its card issued by another bank,
GE Consumer FinanceGE Money is part of GE Capital operating division of General Electric. The division, headquartered in London, claims 130 million global customers and offers a range of financial products, including private label credit cards, personal loans, bank cards, auto loans and leases, mortgages, corporate...
, which now issues three cards for retailer
Wal-MartWal-Mart Stores, Inc. is an American public corporation that runs a chain of large, discount department stores. It is the world's largest public corporation by revenue, according to the 2008 Fortune Global 500. The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and...
and its wholesale warehouse stores,
Sam's ClubSam's Club is an American chain of membership-only retail warehouse clubs. Founded in 1983, it is owned and operated by Wal-Mart Stores, Inc., and is named after Wal-Mart founder Sam Walton. As of 2008, the Sam's Club chain operates in 48 of the 50 U.S. States, and serves more than 47 million U.S....
; 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.
HSBCHSBC Holdings plc is a public limited company incorporated in England and Wales in 1990, and headquartered in London since 1993. As of 2009, it is both the world's largest banking group and the world's 6th largest company according to a composite measure by Forbes magazine.Hong Kong which served as...
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 StanleyMorgan Stanley is a global financial services provider headquartered in New York City, New York, United States. It serves a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 33 countries around the world with 600 offices, with...
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
CanadaCanada is a country occupying most of northern North America, extending from the Atlantic Ocean in the east to the Pacific Ocean in the west and northward into the Arctic Ocean...
, 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-MartWal-Mart Stores, Inc. is an American public corporation that runs a chain of large, discount department stores. It is the world's largest public corporation by revenue, according to the 2008 Fortune Global 500. The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and...
. Some Canadian businesses do accept Discover cards but opt to favor Visa, Mastercard,
American ExpressAmerican Express Company , sometimes known as "AmEx", is a diversified global financial services company that is headquartered in New York City. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best known for its credit card, charge card, and...
and
InteracInterac Association is a Canadian organization linking enterprises that have proprietary networks so that they may communicate with each other for the purpose of exchanging electronic financial transactions...
. ATM service offered by Discover is not currently available in Canada, although cardmembers apparently could access cash at any Sears Canada store.
In the
United KingdomThe United Kingdom of Great Britain and Northern Ireland is a sovereign state located off the northwestern coast of continental Europe. It is an island country, spanning an archipelago including Great Britain, the northeastern part of Ireland, and many small islands...
, Discover issued credit cards on the
MasterCardMasterCard Worldwide is a multinational corporation based in Purchase, New York, United States. Throughout the world, its principal business is to process payments between the banks of merchants and the banks of purchasers that use its "MasterCard" brand debit and credit cards to make purchases....
network under both the Goldfish and Morgan Stanley brands . This division was purchased from
Lloyds TSBIn January 2009, Lloyds TSB Group changed its name to Lloyds Banking Group. This article is now about the brand Lloyds TSB which is still operated as part of the Lloyds Banking Group....
in 2005. It was subsequently sold to Barclays on February 7, 2008. These cards have since been rebranded as
Barclaycard GoldfishBarclaycard is a global credit provider owned by Barclays plc in the UK. The Barclaycard was the first credit card introduced in the UK, coming into service in 1966. It enjoyed a monopoly until the introduction of the Access card in 1972.Barclaycard later became part of the VISA network. Nowadays,...
and Barclaycard Platinum respectively.
While Discover brand cards are not currently accepted in Europe, the company's presence continues to grow in
MexicoThe United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
,
Costa RicaCosta Rica, officially the Republic of Costa Rica is a country in Central America, bordered by Nicaragua to the north, Panama to the east and south, the Pacific Ocean to the west and south and the Caribbean Sea to the east.Costa Rica, which translates literally as "Rich Coast", constitutionally...
,
MicronesiaMicronesia is a subregion of Oceania, comprising hundreds of small islands in the western Pacific Ocean. It is distinct from Melanesia to the south, and Polynesia to the east. The Philippines and Indonesia lie to the west....
, the
Marshall IslandsThe Marshall Islands , officially the Republic of the Marshall Islands , is a Micronesian nation of atolls and islands in the middle of the Pacific Ocean, just west of the International Date Line and just north of the Equator. This nation of roughly 62,000 people is located north of Nauru and...
,
BelizeBelize , is a country in Central America. Belize has a diverse society, composed of many cultures and speaking many languages. Although Kriol and Spanish are spoken among the population, Belize is the only country in Central America where English is the official language...
,
PalauPalau , officially the Republic of Palau , is an island nation in the Pacific Ocean, some 500 miles east of the Philippines and 2,000 miles south of Tokyo. Having emerged from United Nations trusteeship in 1994, it is one of the world's youngest and smallest sovereign states...
, and many of the
CaribbeanThe Caribbean is a region consisting of the Caribbean Sea, its islands , and the surrounding coasts...
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 UnionPayChina UnionPay , also known as UnionPay or by its abbreviation, CUP, is the only domestic credit card organization in the People's Republic of China . Founded in March 2002, China UnionPay is an association for China's banking card industry, operating under the approval of the People's Bank of China...
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. This partnership makes Discover Card the most widely accepted American card in China, beating out competitors Visa,
MasterCardMasterCard Worldwide is a multinational corporation based in Purchase, New York, United States. Throughout the world, its principal business is to process payments between the banks of merchants and the banks of purchasers that use its "MasterCard" brand debit and credit cards to make purchases....
, and
American ExpressAmerican Express Company , sometimes known as "AmEx", is a diversified global financial services company that is headquartered in New York City. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best known for its credit card, charge card, and...
. 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
PhilippinesThe Philippines officially known as the Republic of the Philippines, is a country in Southeast Asia with Manila as its capital city. It comprises 7,107 islands in the western Pacific Ocean....
,
SingaporeSingapore , officially the Republic of Singapore, is an island city-state located at the southern tip of the Malay Peninsula, lying north of the equator, south of the Malaysian state of Johor and north of Indonesia's Riau Islands. At , Singapore is a microstate and the smallest nation in Southeast...
,
ThailandThe Kingdom of Thailand is an independent country that lies in the heart of Southeast Asia.It is bordered to the north by Laos and Burma, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the west by the Andaman Sea and Burma...
,
VietnamVietnam , officially the Socialist Republic of Vietnam , is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea to the east...
, and
South KoreaSouth Korea, officially the Republic of Korea and often simply referred to as Korea, is a country in East Asia, located on the southern half of the Korean Peninsula. It is neighbored by China to the west, Japan to the east, and North Korea to the north. Its capital is Seoul, the second largest...
. A similar agreement was made in August 2006, when the Discover Network announced an alliance with Japan’s
JCBJapan Credit Bureau, usually abbreviated as JCB, is a credit card company based in Tokyo, Japan. Its English name is . The abbreviation is sometimes thought to stand for Japan Commerce Bank, but this is incorrect...
Network. 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 China UnionPay Cards will be accepted on the Discover Network in the United States, Canada, Mexico, Central America and the Caribbean starting November 1, 2007.
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.
Discover acquires Diners Club
In April 2008, Discover Financial Services and
CitigroupCitigroup Inc. , is a major American financial services company based in New York, NY. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate Travelers Group on April 7, 1998.Citigroup Inc...
announced that Discover was purchasing the
Diners ClubDiners Club International, originally founded as Diners Club, is a charge card company formed in 1950 by Frank X. McNamara, Ralph Schneider and Matty Simmons...
network from Citi for $165 million. In May 2008, the U.S. approved the transaction. The deal was completed on July 1, 2008. 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
CitibankCitibank is a major international bank, founded in 1812 as the City Bank of New York, later First National City Bank of New York. Citibank is now the consumer banking arm of financial services giant Citigroup, one of the largest companies in the world...
. Discover Bank has no plans on issuing Diners Club branded cards itself. Discover only purchased the network, and not the licensees issuing the cards.
External links