iscover Financial Services is exploring new horizons in a wider realm of banking relationships. On Nov. 15, 2004, the company, wholly owned by Morgan Stanley, announced it will acquire PULSE EFT Association for $311 million.

The merger marks Discover's first step into the fast-growing debit market. Discover is the fourth-largest credit card brand in the United States; now that the anti-trust case against Visa U.S.A. and MasterCard International is finalized, the gates of competition are open. Discover and its rival and co-plaintiff, American Express Co. (AmEx), both benefited from the recent Supreme Court decision to not hear the appeal by Visa and MasterCard in the six-year long anti-trust suit (see related story, page 39 of this issue).

Discover appears to be looking for new ways to go toe-to-toe with the two long-standing giants and as well as with AmEx, the third-largest card brand. Discover and PULSE jointly announced the signing of a definitive agreement for the merger, which is expected to close within 60 days pending approval by PULSE members and regulatory agencies.

PULSE is an ATM and debit network owned by thousands of small to large banks and savings institutions, many of which are based throughout the middle section of America. It has ATMs and 3.3 million point-of-sale terminals in retail locations around the country.

Both Discover and PULSE say the merger will create an entity providing opportunities and advantages for financial institutions, merchants and consumers. By combining PULSE's PIN-debit network with its own signature-based credit operations, Discover hopes to be a more attractive alternative to card issuers, merchants and cardholders, who increasingly use debit cards more often than credit.

"This strategic partnership will join the forces of PULSE and its 4,100 member banks, credit unions and saving institutions with Discover Network and its more than 4 million merchant and cash access locations," David W. Nelms, Discover Chairman and Chief Executive Officer said in a statement. Both companies expect a seamless transition. PULSE will retain its brand, pricing and operating platform, as well as its management team, staff and Houston headquarters.