Morgan Stanley Spin-Off to Create Third Payments Option

WALL STREET – Morgan Stanley confirmed long-whispered rumors today and announced this morning it will spin off its Discover cards division in an initial public offering some time next year, positioning the unit to better compete with MasterCard and Visa USA in the payments arena. Discover carved out a major slice in the credit union market last year with its acquisition of Pulse EFT, which provides payments services for more than 1,200 credit unions. The spin-off will allow Discover to better focus on its core electronic payments business, in light of last year’s Supreme Court ruling preventing MasterCard and Visa from barring its card issuers from offering competing cards, like Discover of American Express. Morgan Stanley executives said they see the timing of the spin-off as critical, in light of the doubling of MasterCard’s share price since its IPO last May, and a planned IPO by Visa sometime next year.