In order to expand its footprint globally, Discover Financial Services (DFS: 14.78 +0.15 +1.03%) will form an alliance with the Serbian payment system DinaCard, as announced on Thursday to allow its card holders to purchase and withdraw cash outside Serbia by the end of 2010.DinaCard is the national Serbian payment card operated by the Serbian central bank, the National Bank of Serbia and has all Serbian banks as member banks. It has 2.5 million cards in distribution, and with the end of the international travel restriction by Serbia, DinaCard card holders will now have global access to credit and cash withdrawals.
The agreement will allow DinaCard card holders to use their cards wherever Discover Network, Diners Club International and PULSE cards are accepted. This will enhance the transaction volume on Discover’s payment networks, with the remaining local volume on the DinaCard network.
The system would position the Discover Network, Diners Club International and PULSE identifiers on the reverse side of the DinaCard cards. Further, the cards will be renewed and replaced periodically by participating issuing banks.
Discover has a payment business consisting of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation’s leading ATM and debit networks; and Diners Club International, a global payments network accepted in more than 185 countries.
This coalition will add to Discover’s existing strategic alliances with BC Card, China Union Pay and JCB formed over the past several years, which offer growth prospects, value and volume to merchants and partners.
We believe that Discover is consistently focusing on its strategy to expand globally by forming alliances with other payment networks. Through this alliance, both Discover’s payment network and DinaCard card holders will gain with increased volumes on their networks and worldwide presence.
In addition, we believe that the cards segment forms the key source of income for Discover. Hence, such alliances will expand the use of cards and gear up Discover’s credit performance. Consequently, earnings will continue to grow, encouraging investments in the stock over the longer term.
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