Monday, March 12, 2012

Discover Financial Agrees To Alliance With Payments Group In India

 Source: http://online.wsj.com/article/BT-CO-20120307-709504.html

--Discover to process transactions made with India's RuPay cards
--Discover and Diner's Club cards will be able to be used at ATMs and merchant terminals in India
--Discover is trying to grow its international footprint
 
NEW YORK -(Dow Jones)- Discover Financial Services (DFS) will process transactions made by cards on India's RuPay payment network under a deal aimed at bolstering Discover's international footprint.
The Riverwoods, Ill.-based credit-card company said Wednesday its alliance with the National Payments Corporation of India will also allow its own cardholders to use their cards at ATMs and merchant terminals in India.

The National Payments Corporation of India was established in 2009 to develop a payments card network similar those operated by Visa Inc. (V) and MasterCard Inc. (MA) for India. That network, RuPay, is still being built out.

"By opening up our global payments network to RuPay cardmembers, we are participating in one of the fastest growing countries for payment cards in the world," Diane Offereins, executive vice president and president of payment services at Discover, said in a statement. "Discover and Diner's Club cardmembers also will benefit from their ability to more broadly use their cards to access cash or make purchases throughout India."

Discover has had a presence in India, including a deal in which HDFC Bank, an Indian bank, issues Diner's Club cards in the country. Diner's Club is owned by Discover.

Discover, like American Express Co. (AXP), typically issues its own credit cards and operates a payments network that processes transactions, unlike Visa and MasterCard, which only process transactions. Higher transaction volume helps boost their revenue.

Discover has a smaller acceptance footprint internationally than does American Express, Visa and MasterCard, though it has been working to change that.

"We're working aggressively to make sure we have strong franchises in India and in China to make sure we can capture" growth in those markets, Roger Hochschild, president and chief operating officer of Discover, said at an investor conference last month.

As part of the new agreement, RuPay card transactions made outside India will be processed over Discover as well as Discover's Diner's Club and Pulse ATM networks. The deal will be rolled out in a "phased manner, starting with acceptance of Discover and Diner's Club cards at RuPay ATMs in India, followed by merchant terminals in India.

The deal is a "nice win for Discover," Sanjay Sakhrani, an analyst with Keefe, Bruyette & Woods, wrote in a research note Wednesday. However, the financial benefits of the deal aren't likely to come until the later stages of the rollout, Sakhrani wrote.

Discover's shares are up more than 38% over the last year. Its shares were up 1.4% at $30.34 in recent trading.