Discover Scores U.S. JCB Transactions in Latest Deal to Open Network

In the latest of a series of moves to open its network to outside card issuers and transaction processors, Discover Financial Services LLC on Wednesday said Discover Network will begin processing transactions for JCB International Credit Card Co. Ltd. some time next year. In 2008, Discover cardholders will be able to use their cards at JCB merchants in Japan. As part of the arrangement, it appears JCB cards will bear an acceptance mark for Discover, though Roger Hochschild, president and chief operating officer for Riverwoods, Ill.-based Discover, says specifics of the branding scheme, including how marks will be placed on cards, have yet to be worked out. “Any merchant that accepts Discover will then accept JCB,” he says. All U.S. merchant traffic for JCB will be routed through Discover Network, and Discover will pass on an unspecified percentage of its discount fee?in a fee arrangement that Hochschild likens to interchange?to Tokyo-based JCB, which will pass on part of the income to its issuers. Merchant pricing for JCB transactions is still unsettled, Hochschild says. “It may vary by merchant and by category,” he says. Discover does not plan to change pricing for current JCB merchants in the U.S., he adds. Figures for number of U.S. merchants are not available for either Discover or JCB. Discover says it has 4 million acceptance locations, including ATMs. JCB claims 13.8 million merchants worldwide. Hochschild says he can't be more specific about when JCB transactions will start flowing through Discover. “We have technology teams working on it from both sides,” he says. “It's very complex. I'm not willing to be more precise [than 2007].” Discover says its current merchants will benefit from the deal because it will mean more volume for them, as well as higher average tickets. “It's very attractive volume for merchants,” Hochschild says. He refuses to say how much incremental volume JCB acceptance will bring the Discover Network. According to U.S. Department of Commerce statistics cited by Discover, more than 3.8 million Japanese travelers came to the U.S. last year, spending in excess of $12.9 billion. “JCB clearly has a significant share of that,” Hochschild says. JCB, founded in Japan in 1961, has formed alliances with 350 financial institutions around the world and has 57.7 million cardholders. Discover, along with American Express Co., has worked to forge alliances with banks and outside processors since the U.S. Supreme Court in October 2004 let stand a lower-court decision that opened the two non-bank networks to banks. The JCB deal follows by weeks an arrangement Discover made with First Data Corp. to allow Discover acceptance at small merchants on accounts owned and serviced by First Data (Digital Transactions News, July 14). Last year, Discover began processing transactions for a Wal-Mart Stores Inc. card issued by GE Consumer Finance Inc. (Digital Transactions News, Jan. 24, 2005).