Discover Unveils a Signature Debit Card, Though No Issuers Yet

Morgan Stanley's Discover Financial Services LLC today launched a signature-based debit card, dubbed Discover Debit, as the second major prong in its debit card offensive. Because signature-based debit delivers higher income to issuers than PIN debit, observers have looked for such a product from Discover ever since the Riverwoods, Ill.-based network acquired the Pulse EFT Association debit card network a year ago. Discover doesn't have any issuers on board yet for the new card, though it has signed several processors to handle the new card's transactions. Signing issuers, however, is just a matter of time, according to David R. Schneider, vice president for corporate debit strategies at Discover and executive vice president at Houston-based Pulse “Our first contact has been with the processor community,” Schneider tells Digital Transactions News, adding that he expects an announcement about an issuer “in the not-too-distant future.” In a news release, Discover notes that Pulse has 4,100 financial-institution members. Discover Debit's first processors include U.S. Bancorp's Elan Financial Services unit, Jack Henry & Associates Inc., NetSpend Corp., and Central National Bank & Trust Co. of Enid, Okla. Discover is talking with more processors, says Schneider. Schneider refuses to disclose Discover Debit's discount rates or other pricing details. “What's important to note is that we are going to be competitive on both the merchant and issuer side of the equation,” he says. Schneider claims Discover's network costs merchants less than the bank card networks. In addition, Discover requires an authorization for each transaction, making Discover less vulnerable to fraud than banks that permit debit card transactions under a floor limit to go through without authorization, he says. Schneider also notes that Discover isn't saddled with the huge legal costs and potential damages Visa USA and MasterCard International face in defending nearly 50 merchant lawsuits challenging interchange. “Just to be honest, we're not getting sued by most of the known universe,” he says. All signature-based debit cards in the U.S. market today carry only the Visa or MasterCard marks. Besides what Schneider calls “good economics,” the business case Discover is taking to potential issuers includes adding a tool for reaching customer segments heretofore overlooked or denied Visa/MasterCard debit cards, and creating some excitement in what he says is a saturated debit market. “Just the chance to offer something new and different makes this product very appealing,” he says. The card will include PIN-debit functionality at the issuer's discretion. Discover won't require issuers to use Pulse, says Schneider. Discover will offer consumer and small-business versions of the debit card.