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Last week, PULSE – a unit of Discover Financial Services (DFS - Analyst Report) – announced an agreement with EUFISERV Payments for strategic ATM participation. Consequently, over 68 million owners of ATM cards, issued by around 600 member banks of EUFISERV, will be able to use PULSE’s global ATM network for transactions. The PULSE network consists of over 850,000 ATMs.

The companies have planned a two-phase implementation of the agreement. In the initial phase, EUFISERV’s cardholders will have access to PULSE’s European ATMs only. Thereafter, the partnership will be extended to other countries that EUFISERV’s members visit often.

The agreement will substantially boost PULSE’s ATM transaction volume. 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.

The agreement is an important step in strengthening Discover’s global payment network. The company is widening its network as a part of its ‘Network to Network’ strategy, thereby providing a larger range of payment options to its institutional and individual clients. Apart from offering a global reach, the company strives to fulfill the localized preferences of clients by teaming up with regional payment networks, such as EUFISERV.

The agreement will enhance the acceptance of EUFISERV’s ATM cards in many key markets and expand its European payment network. Thereby, the company’s members will have access to a wider network of ATMs.

Discover currently carries a short-term Zacks #3 Rank (Hold). We maintain a long-term ‘Neutral’ recommendation on the stock. Peer in the card industry – Visa Inc. (V - Analyst Report) carries a Zacks #2 Rank (Buy).

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