In order to expand its payment network in India, Discover Financial Services (DFS) announced an agreement with National Payments Corporation of India (“NPCI”), the organization which covers all retail payment systems in India. Consequently, the company’s Discover and Diners Club International (“DCI”) cards will be accepted at all ATMs and point-of-sale terminals of NPCI in India.
However, as the point-of-sale network of NPCI is not yet active, initially only NPCI ATMs will accept Discover’s cards. Once the point-of-sale network is implemented, the second phase, i.e., acceptance of Discover’s cards at point-of-sale terminals will begin.
Subsequently, the Discover, PULSE and DCI payment networks will be utilized by RuPay, the national card payment network of India, for international transactions on its soon-to-be-launched RuPay Global cards.
However, the domestic RuPay cards will utilize NPCI’s network for transactions in India. Additionally, Discover and NPCI will work together to use Discover’s EMV technology, D-PAS, to develop chip-based RuPay cards, which is safer than the widely used magnetic strip technology.
The agreement is expected to increase the network transaction volume for both Discover and NPCI. Additionally, it will boost the acceptance of Discover’s cards in India, which is one of the fastest growing markets for card transactions.
Discover also has similar alliances with UnionPay in China, JCB in Japan, BCcard in Korea and DinaCard in Serbia. The company has been slowly expanding its card acceptances in order to enhance its competitive strength against bigger card companies like MasterCard Incorporated (MA) and Visa Inc. (V).
In November 2011, DCI inked a merchant acquiring agreement with WorldPay, a leading international payment and risk service provider. Earlier, in October 2011, the company’s subsidiary PULSE had signed a long-term agreement with Nebraska-based NETS Inc. for ATM and debit acceptances.
The Zacks Consensus Estimate for the company’s first-quarter 2012 earnings is currently pegged at 88 cents per share, up about 5% year over year. For full-year 2012, the Zacks Consensus Estimate stands at $3.40 per share, down 16% from 2011.
Currently, Discover carries a Zacks #1 Rank, implying a Strong Buy rating for the short term. Considering the fundamentals, we maintain our long-term Outperform recommendation on the stock.
DISCOVER FIN SV (DFS): Free Stock Analysis Report
MASTERCARD INC (MA): Free Stock Analysis Report
VISA INC-A (V): Free Stock Analysis Report
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