Discover Financial Services LLC shut down its Discover Network Referral Acquisition Program (RAP) and External Agent Sales Incentive (easi) program as part of a strategic move to a market-based acquiring model similar to that of MasterCard Worldwide and Visa U.S.A, effective Nov. 1, 2007.
"The acquiring world is very much aware that we are in the middle of changing our business model," said Gerry Wagner, Discover's Vice President of Acceptance and Client Relations.
He said Discover's relationship management team has been communicating with all affected parties and that ISOs and acquirers have been asking for this transition for the better part of seven years.
Because the RAP program offered an upfront bonus, its closure will have little long-term effect. The easi program had a trailing residual component. Wagner said Discover will continue to honor those residual commitments.
"We'll get rapidly spreading acceptance with this new model, and that will help all the parties involved -- merchants, ISOs and Discover," Wagner said. He added that Discover expects to have 18 of the top 20 acquirers signed up by the end of the year.
In terms of merchant benefits, Wagner said, "We call it the power of one. One contract, one bill, one platform: Discover, MasterCard, and Visa acceptance all in one package. We all want what is best for the merchants, and I think this is it."
Wagner believes ISOs will "enjoy the same spread on a Discover transaction as they would on a competitor's transaction."
Michael Nardy of Electronic Payments Inc. (EPI) said, "The acquiring model is in line with Discover's long-term goal to broaden acceptance of its card -- the bread and butter of its revenues.
"Their feeling is developing acquirer relationships similar to Visa and MasterCard will ensure more Discover Network merchants and, therefore, more cardholders. This isn't happening overnight, but it is happening, and it will not be going away. They are committed to moving forward under an acquiring model."
Nardy said EPI is one of the first Discover acquirers under that model.
"Our ISOs currently have a Discover acquirer interchange chart just like Visa and MasterCard and earn residuals much more than the 10 basis points we used to pay under the easi compensation model," he said.
"Also, as an acquirer, we settle Discover transactions so there is one statement for all card types (except AmEx), all provided by EPI."
Wagner said Discover currently offers two plans: a full systemic acquiring system, and an interim system for those who have signed the acquiring agreement and wish to enter the market immediately, but have not yet been fully certified.
"Our goal is, of course, that everyone will eventually be enrolled in the full technical, certified solution," Wagner said. "But people have been waiting for this program for a while, and they wanted to offer it immediately.
"Ultimately we want to do what is right for the market in a seamless, nondisruptive way. We're having a ton of success with this program."
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