First Data Won’t Be the Last Processor to Certify with Discover

First Data Corp. may have become the first third-party processor to achieve certification on Discover Financial Services Inc.'s network, but it almost certainly won't be the last as the card company uses its newly won freedom to win over issuers of the bank card brands, according to the top executive for the Discover network. “We will have similar arrangements with other third-party processors,” promises Harit Talwar, executive vice president for Discover Financial. He refuses to give specifics regarding any current negotiations or certification efforts, but a payments industry consultant and former Discover executive says Metavante Corp. and Stored Value Systems Inc. are among processors Discover has invited to complete network certification, in addition to First Data. Though remaining mum on details, Talwar points to processors Discover is already working with to process gift and other stored-value card transactions as likely additional candidates to join First Data as endpoints on Discover's credit and debit card transaction network. Discover approached processing companies last fall about third-party certification as it was gearing up in anticipation of an expected U.S. Supreme Court decision. Both Discover and American Express Co. looked to the court to uphold a lower court decision that had struck down Visa and MasterCard rules preventing members from issuing cards on either the Discover or AmEx networks. The expected top-court decision came last October. “Discover invited people it saw as credible players,” says the consultant, James D. Higgins, of Jim Higgins & Associates Inc., Hoffman Estates, Ill. Among the processors using the Discover network currently for stored-value programs are Mid-America Gift Certificate Co., a Colorado subsidiary of banking company BB&T Corp., and WildCard Systems Inc., Sunrise, Fla. Mid-America processes Discover-branded gift cards for some 28 Mills Co. shopping and entertainment centers and 42 Rouse Co. shopping malls. Wildcard processes a prepaid Discover program for Utix, which markets stored-value programs for day spas, golf courses, and ski resorts. In addition, Discover in June 2003 reached an agreement with Milwaukee-based Metavante to produce and process gift cards, and in October 2001 it signed a gift-card processing deal with Stored Value Systems, Louisville, Ky. First Data announced last week it had become the first third-party processor to become certified on the Discover network. It will handle account processing for credit cards GE Consumer Finance will issue on the Discover network that will be co-branded with Wal-Mart Stores Inc. (Digital Transactions News, Jan. 28). The cards are expected to go into circulation in March. Discover in January completed its acquisition of the Houston-based Pulse electronic funds transfer network, which gives the credit card network a major position in PIN debit card processing and a potential foothold in signature debit cards (Digital Transactions News, Nov. 16, 2004).