Discover Adds Chase Paymentech, Says More Acquirer Deals Coming

With its announcement on Thursday that it has added Chase Paymentech Solutions LLC, the nation's largest merchant acquirer, to its stable of bank card acquirers offering acceptance to small and mid-sized merchants, Discover Financial Services LLC further reduces what was once a yawning gap between itself and the bank card networks among merchants below the top tier. Moreover, Riverwoods, Ill.-based Discover, which has executed a string of deals with bank card processors over the past year, says it is by no means done signing acquirers. Without mentioning specific companies, Discover executive vice president Harit Talwar indicates the process is still ongoing. “Our goal is to have all of the acquirers in the market signed up,” he tells Digital Transactions News. The addition of Dallas-based Chase Paymentech brings under Discover's wing most of the top U.S. merchant processors. The first such deal in which Discover opened its closed-loop network to bank card acquirers in order to expand acceptance involved First Data (Digital Transactions News, July 14, 2006). Other publicly announced partners include Global Payments Inc., U.S. Bancorp's Nova Information Systems, First National Merchant Solutions, Fifth Third Bancorp, TSYS Acquiring Solutions, TransFirst LLC, RBS Lynk, Newtek Business Services Inc., and Electronic Payments Inc. A notable exception is Bank of America Corp. Chase Paymentech, 51% owned by JPMorgan Chase & Co. and 49% owned by processor First Data Corp., has about 600,000 merchants representing almost 1 million locations. Riverwoods, Ill.-based Discover says it has more than 4 million U.S. merchant-acceptance locations. The Chase Paymentech deal's major aspects are similar to those of Discover's other acquiring partnerships. Transactions will flow over Discover's network, but Chase Paymentech will own the Discover accounts it signs and handle underwriting, statements and customer service, and other back-office functions. Chase Paymentech will set merchant pricing, with Discover getting an undisclosed share of the revenue the merchants generate. The pact also includes the sale of Discover accounts to Chase Paymentech in situations where Chase Paymentech already was the merchants' bank card acquirer, says Diane Donoghue, Chase Paymentech executive vice president and general manager of retail network services. Neither party would disclose the number of accounts involved, but Donoghue says it is “a lot.” Discover has done similar sales with other acquirers. Talwar says a hindrance to small-merchant acceptance of Discover was the network's separate statements and other processes, so his aim is to make acceptance of Discover part of the same process as signing up for acceptance of Visa and MasterCard cards, which acquirers almost universally sell as one package. “I think we are reaching the same goal through this program,” he says. The upshot for merchants is a single monthly statement and one-stop shopping with customer service, he says. Discover is on par or perhaps even slightly ahead of the bank cards among large national merchants, but isn't as strong lower down. While Chase Paymentech serves some of the nation's largest retailers, such as Wal-Mart Stores Inc., it also has a sizable stable of card-not-present and smaller merchants. That portfolio will help plug some holes for Discover. “We've had gaps,” says Talwar. Besides the obvious extra volume, the Discover deal enhances Chase Paymentech's claim of offering a full suite of card-processing services that includes the upstart Tempo Payments Inc. PIN-debit network. “It gives our merchant a consolidated solution,” says Donoghue. Chase Paymentech has already started integrating Discover services into its systems, a process the parties expect to be complete next year.