Discover Seals Its Pulse Acquisition Following Pulse Members’ OK

Discover Financial Services Inc. and Pulse EFT Association announced today that Discover's $311-million acquisition of the Houston-based electronic funds transfer network, announced in November, has closed. The deal's completion follows approval of the merger by Pulse's member banks, and, according to Discover, more than doubles the company's U.S. card base and transaction volume. “It's a new day in electronic payments,” said David W. Nelms, chairman and chief executive of Riverwoods, Ill.-based Discover, in a statement. “We believe the combination of Pulse's experience in debit and Discover's signature capabilities will enable us to offer additional choices in the important and growing debit market.” Pulse, which has been owned by its member banks since its founding in the 1970s, now becomes a business unit of Discover, which itself is owned by New York investment firm Morgan Stanley. Pulse will retain its brand, management personnel, and Houston headquarters. The network said at the time the deal was announced that participating banks would continue to have a voice in the direction of the network through an oversight committee. Approval from the banks for the merger was no trivial matter, since under Pulse rules each member had one vote. The merger combines a card company with 50 million credit card accounts and 4 million merchant locations with a major regional ATM and point-of-sale PIN debit network serving 4,100 member banks, credit unions, and savings institutions. The acquisition also hands Discover, which was started 20 years ago by Sears, Roebuck & Co. and has been up to now almost exclusively a credit card issuer and acquirer, a prime position in the sizzling market for PIN debit transactions. Discover may also use Pulse as a platform on which it can launch a signature-debit product (Digital Transactions News, Nov. 16). Pulse is experienced in the signature-debit business as it processes signature-debit card transactions for 250 of its members that issue either Visa or MasterCard debit cards. Pulse, along with NYCE Corp. and Star System, is one of the few remaining regional electronic funds transfer networks following years of network consolidation. Early last year, it completed work on a new, state-of-the-art switch to handle current and expected transaction growth. The network links 250,000 ATMs and 3.3 million POS terminals around the country, and has its logo on 90 million cards. Metavante Corp. acquired NYCE last summer, and Star was acquired by First Data Corp. earlier in 2004.