Discover Extends Provider Agreement

PULSE, a unit of Discover Financial Services ( DFS - Analyst Report ) , has announced an extension of its network provider agreement with Motorola Employees Credit Union (“MECU”). Per the new agreement, MECU’s 39,000 members will be able to use PULSE’s PIN debit network for monetary transactions.

The new agreement entitles members the access to PULSE’s point-of-sale terminals at various retail locations as well as its 380,000 ATMs in the U.S. The agreement is an extension of PULSE and MECU's long-standing business arrangement. PULSE has been providing its services to MECU’s members since 2007.

The extension of the agreement reflects PULSE’s ability to satisfy its customers through its exemplary services. The company was able to enhance the debit economics of MECU through its efficiency. This was reflected in MECU’s comprehensive analysis of its debit program transaction history.

The review, conducted with the assistance of the Illinois Credit Union League Service Corporation, revealed that MECU’s debit economics improved whenever it used PULSE network for its debit transactions. PULSE provides a safe and efficient network for transactions to the credit union, which has 10 branches across five U.S. states.

Apart from the debit network, the agreement also provides MECU with access to the PULSE Debit Dashboard and DebitProtect. PULSE Debit Dashboard is an Internet-based tool that provides data related to a debit program if a client wants to analyze it, while DebitProtect is a fraud detection service.

PULSE is a part of Discover’s Payment Services segment, which witnessed a 10% growth in its pre-tax income and a $10 million surge in revenues in the second quarter of 2012, primarily due to an increase in point-of-sale transactions on the PULSE network. We expect the strong operating performance of PULSE to continue in the future as well, based on its ability to retain existing customers while continuing to acquire new ones.

Discover, which competes with MasterCard Incorporated ( MA - Analyst Report ) and Visa Inc. ( V - Analyst Report ) , carries a Zacks #2 Rank, which translates into a short-term Buy rating. We maintain a long-term Outperform recommendation on its shares.