Zacks_Analysts' Blog : DFS - WorldPay Pact at Next Level - Analyst Blog

As an extension to their current alliance and also to augment the acceptance of Discover and Diners Club card, Diners Club International, a unit of Discover Financial Services (DFS), inked a merchant acquiring agreement with WorldPay, a leading international payment and risk service provider.

Accordingly, the Diners Club and Discover Cards will be offered as a standard payment processing option to all WorldPay merchants from early 2012. Additionally, WorldPay will start supporting Discover’s EMV-compliant payment solution, D-PAS, and will also be enabling chip-based terminals at points of execution. At present, the service provider accepts Diners Club Card only on merchants’ request.

The alliance comes at an opportune time, with the upcoming summer Olympics in London, which is bound to increase in-bound tourism in the U.K. Thus, Discover can expect a surge in its Payment Services segment’s revenue, while WorldPay’s payment services portfolio will be enhanced with the inclusion of Diners Club Card, which is the world’s first multi-purpose charge card and is an internationally recognized brand.

Discover has been slowly expanding its card acceptances in order to enhance  its competitive strength against bigger card companies like MasterCard Incorporated (MA) and Visa Inc. (V). Recently, on October 13, 2011, the company’s subsidiary PULSE signed a long-term agreement with Nebraska-based NETS Inc. (NetWorks) for ATM and debit acceptances.

While the agreement allowed NetWorks’ member institutions to use the PULSE network for PIN debit transactions, it also substantially increased the acceptances of Discover’s PULSE, Diners Club and Discover Cards. Over 1,400 NetWorks’ ATMs started accepting Discover’s cards as per the agreement.

The market reacted positively to the news, taking the closing price of Discover on Tuesday to $23.21, up 1.53%, on the New York Stock Exchange.

Currently the company carries a Zacks #3 Rank, implying a 'Hold' rating for the short term.