Discover Financial Services has expanded acceptance of its cards at merchant locations in the United States to its satisfaction after opening its network to third-party acquirers in 2007. The company’s goal now is to raise merchants’ awareness that they can accept Discover cards and to expand operations globally, says Gerry Wagner, Discover vice president of global acceptance.

“We are literally down to the last mile here in the U.S.,” says Wagner. “The [merchant-acquiring] program has done a tremendous job over the last three years.”

Discover cards are accepted at 7.7 million merchant locations in North America. Additionally, acceptance has reached 90% in the U.S. versus the acceptance rates of competitors Visa Inc. and MasterCard Worldwide, he says.

Indeed, Discover is at roughly the same level as Visa Inc. and MasterCard Worldwide and is ahead of American Express Co. in terms of acceptance, says Adil Moussa, an analyst with Boston-based Aite Group LLC.

Discover has been “very successful in expanding the number of merchant locations that accept its cards,” says Moussa. “All the new merchants that sign up with any of Discover’s acquiring partners are automatically set up to accept Discover.”

The company is working with 125 acquirers, which can bundle Visa, MasterCard and Discover transactions into one rate and one statement for the merchant. This is up from 96 acquirers roughly one year ago, Wagner says. Acquirers also can bundle AmEx transactions into their merchant statements.

The third-party acquiring effort is appears to be a success for Discover, says Moussa. “Theoretically, all merchants accepting Visa and MasterCard are now accepting Discover. Realistically, the activation rate is not as high as Discover wants it to be,” he says.

By working with acquirers, Discover has lost the direct relationship the company used to have with smaller merchants, “so the trade-off means that Discover has less opportunities to talk to merchants directly and get them to activate the account,” says Moussa. Discover still works directly with its largest merchants.


Increased Awareness

Having increased acceptance of its cards, Discover is working to raise merchant awareness, says Wagner. Ensuring merchants know they can accept Discover cards is “most important to us right now,” he says. “Old habits are hard to break,” and some merchants may be inclined to tell consumers they do not take Discover cards out of habit.

Discover is using an internal team and its acquiring partners to help bolster merchant awareness of Discover card, says Wagner. The acquirers make merchants aware of all the card types included in their acquiring packages. Discover’s internal team visits merchant locations to ensure Discover promotional signage is present at payment terminals and that merchants are aware they are capable of accepting the cards, he says.

The campaign has “grown activation of the merchant base by 21% over the last three years,” says Wagner.

Discover “has been really creative in their campaigns to create awareness,” says Michelle Wagner, senior vice president of marketing at Elavon Inc., an Atlanta-based processor. Discover has been working with Elavon, one of its third-party acquiring partners, to raise merchant awareness of Discover card acceptance, she says.

One of Discover’s tactics is to launch mailing campaigns to Discover customers near specific partner merchants, says Elavon’s Wagner. The mailings, which often are branded by both Discover and the merchant, typically offer Discover cardholders an incentive, such as a discount, to use their cards at the local merchant’s retail locations.

Such campaigns not only help merchants understand they accept Discover cards but also help merchants increase awareness among consumers of their own businesses. In most of the campaigns, the merchants “don’t have to do much” to receive the benefits, Michelle Wagner notes.

That Discover not only works with merchants to increase their awareness of the Discover brand but also to extend incentives to card members “is a little unique,” says Elavon’s Wagner.


Global Expansion

Discover also is focusing on global expansion.

The brand is not “shying away” from its U.S. efforts now that it has increased the number of locations where its cards are accepted, “but we have global ambitions,” says Discover’s Wagner. Discover’s goal is to “have 125 countries ready to accept Discover cards by the end of this year,” he says. Discover cards are accepted in more than 43 countries.

Discover has been “very public about our stated goal of building a global payments company,” Discover’s Wagner says. Acquiring agreements with such companies as Elavon, Atlanta-based Global Payments Inc. and India-based Venture Infotech are helping Discover reach its international goals, he says.

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