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Discover Financial, 3C Payment Ink Deal to Boost Business

Zacks Equity Research

Diners Club International, a subsidiary of Discover Financial Services DFS and part of the Discover Global Network, has entered into an agreement with 3C Payment, a leading global payment service provider.

Per the pact, Discover Financial will be able to serve merchants — catered to by 3C Payment —in hospitality, quick service restaurant and retail industries. Offering services to these merchants, traveling across Europe and the Middle East, will widen Discover Financial’s reach in these regions.

The company has a broad Global Network with more than 44 million merchant acceptance locations and 2 million ATM and cash access hubs across 190 countries and territories. Its network includes Discover, Diners Club International, PULSE and affiliated networks.

This tie-up with 3C Payment is in line with the company’s efforts to expand its payments business volume. The company consistently leverages network to support its card-issuing business.

Recently, Discover Financial teamed up with IDEMIA, the world leader in Augmented Identity, to ease and accelerate mobile and digital contactless payment adoption and rollout by card issuers. This agreement will enable more cardholders to use their mobile devices for payment and other value-added services, thus driving transaction processing for Discover Financial.

For the first nine months of 2018, the company processed $277.5 billion of transactions via its network which was up 13% year over year. The company’s collaboration with third-party acquirers like the latest one will further bump up its transaction processing volumes.

Discover Financial is one of the major card issuers in the United States and a leading innovator in the credit card industry. The company steadily launches products tailor-made for specific customer needs in order to attract new clients. It is also active in forging alliances and partnerships that led to growth in card sales volume at 4% average rate in the last four years (2013-2017), primarily owing to a rise in the number of customers using Discover card.

Additionally, the metric grew 12% year over year in the first nine months of 2018. We believe, significant investments in marketing and business development will continue to benefit Discover Financial’s card account growth and card sales volumes in the future.

Shares of Discover Financial have lost 9% in the past six months compared with the industry’s decline of 15.5%.

The stock carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same space are Ally Financial Inc. ALLY, SLM Corporation SLM and CatchMark Timber Trust, Inc. CTT, each stock carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ally Financial beat estimates in each of the last four reported quarters, the average being 13.1% while SLM Corporation and CatchMark Timber topped the same in two of the trailing four reported quarters, the average positive surprise being 5.3% and 15.7%, respectively.

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