Discover Financial Services
) announced an affiliation with Birmingham-based Cadence Bank to
launch the new Cadence Bank Debit Card. Through this alliance,
Discover Debit will provide network support to the new debit
card, which will be issued to all Cadence debit card holders in
the second quarter of the year.
The alliance is a result of Cadence's comprehensive evaluation
of its debit options, which revealed that an affiliation with
Discover would be the most beneficial for the bank. The
evaluation was conducted considering the changing scenario in the
financial services segment. There is a visible shift in the
utilization of traditional payment options due to the changing
needs of consumers.
Thus, in order to make transfer, management and spending of
money easier, Cadence decided to improve its signature debit
program. The bank believes that the alliance with Discover will
help in offering appropriate solutions to its card members.
Moreover, Discover is offering an attractive interchange rate
structure and lower network fees, which is expected to enhance
the bank's profits.
Further, with this alliance, Cadence card holders will get
access to over 8.5 million merchant locations in the U.S.
Moreover, participation in the PULSE Loyalty Edge program is
expected to boost spending at individual merchant locations by
offering loyalty rewards to card holders. This in turn will help
strengthen local commercial-client relationships, which will be
beneficial for all the parties.
Cadence's faith in Discover, despite the presence of larger
players in the market, shows the company's growing clout in the
market. The company is benefiting by offering flexibility and
superior value proposition to clients in an industry that
traditionally offers entrenched business models.
Discover Debit not only offers an extensive coverage in the
U.S. along with security and convenience, but also provides
efficient fraud-prevention and data-security tools. This reduces
the risk of debit card fraud for card holders.
The alliance is expected to boost the transaction volume in
Discover's PULSE network, which manages Discover Debit. This in
turn will boost the revenues of Discover's Payment Services
segment. The segment has already been witnessing substantial
growth over the past few quarters, primarily due to an increase
in point-of-sale transactions on the PULSE network.
Discover currently carries a Zacks Rank #3 (Hold). We maintain
a long-term Neutral recommendation on the stock. Peers in the
card industry -
) carry a Zacks Rank #2 (Buy).
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