Discover Credit Cards: Their Future Market Share
Sunday, December 27th, 2009 at 11:04 am
Five thousand years ago, the Mayans used cocoa as currency. Today, we use plastic… in the form of debit and credit cards. Just over the last few years, we have seen a surge in card payments. Due to their versatility, security and ease of use, plastic is quickly becoming the preferred payment method for many.
In the United States, Visa and MasterCard are the dominant players; a 42.2% and 29.1% market share, respectively. American Express takes third place with 23.2%. Then there’s Discover Financial… capturing only 5.6% of the market. Considering the booming industry and Discover’s growing popularity, does this mean they will become a major player in the near future?
Organic Cardmember Growth
The industry was turned upside down in 1986, when Discover made its debut with no annual fee credit cards. Back then, almost every credit card charged an annual fee, so this in itself was a revolutionary concept at the time. On top of that, they were the first to offer cash rewards on purchases.
Over the years they have continued this same marketing strategy to grow the company. Today, the Discover Miles card (airline rewards) and Discover More card (general rewards) are two of their biggest hits. However with success comes scrutiny; some complain that their reward programs are confusing and not transparent enough.
Growth Through Acquisitions & Partnerships
Over the years the company has made a number of acquisitions to fuel growth, including the 2008 purchase of Diners Club (which was the very first credit card company in the world). They struck a partnership with UnionPay; which made Discover the most accepted American credit card in China. In Japan, they also have an arrangement with JCB network to process their cards.
Why Discover May Not Grow At All
Although the company appears to be poised for stellar growth both domestically and internationally, it’s possible they may not get any bigger than what they are right now. First and foremost, the credit card industry is cutthroat; competing against Visa and MasterCard is no easy task. Secondly, they have yet to gain acceptance in Europe – a very lucrative market. The bottom line is that only time will tell if Discover credit cards sizzle or fizzle.
Tags: credit cards, discover miles card