Discover Financial Services LLC, which announced plans a year ago to offer signature debit products, said it has refined its debit marketing efforts to focus on the corporate market.
David Schneider, the president of Discover's debit unit, Pulse EFT Association LP, said his company "understood from the beginning" that the debit market would be "a challenging market for us."
With Visa U.S.A. and MasterCard Inc. well entrenched in the signature debit market, the Morgan Stanley unit knew it had to find its own debit "niche," Mr. Schneider said.
Though Discover offers issuers both consumer and business debit products, he said, the corporate market offers more room for a newcomer.
"We identified up-front opportunities in the business debit space," Mr. Schneider said. "Unlike consumer signature debit, business signature debit is still in an early stage of development. A lot of institutions, particularly smaller ones, don't have a business debit program."
He would not say how many issuers offer Discover debit products, though he did say that Discover is "pleased with the implementation, acceptance, and adoption of Discover debit to this point." Central National Bank and Trust Co. of Enid, Okla., began offering Discover debit cards to consumers in November and plans to offer business ones soon.
Paul A. Tomasofsky, the president of Two Sparrows Consulting LLC, said there are open "green fields" in the small-business debit market, so it was wise of Discover to focus its marketing there.
"It's a real uphill struggle to do so on the consumer side," he said.
Mr. Schneider said that Discover permits issuers to offer business debit cards with or without zero-liability policies, in which cardholders are not held liable for losses caused by fraud; businesses that use cards without such a policy agree to cover fraud losses.
Regulations mandate that banks cover fraud losses for consumer cards, but those rules do not apply to business cards.
Mr. Schneider said that letting banks offer business cards without a zero-liability policy could attract new issuers to Discover.
"When you talk about business debit, you're talking about putting that card in the hands of not just the owner of that business, but maybe into the hands of employees, so you've got to be concerned about risk management in that environment," he said.
"It may very well be that one of the reasons why the institution hasn't ventured into the business debit space is because they are concerned about liability," Mr. Schneider said. "If we allow them to issue the card without zero liability, that may make it more appealing from the financial institution's perspective."
Eric Grover, the principal and founder of the Menlo Park, Calif., consulting firm Intrepid Ventures, said that few community banks offer business debit cards, and that giving them the option of zero liability "ought to make it more appealing" to them.
To make its cards more appealing, Discover also is offering businesses consulting services. Small businesses can seek free advice on human resource issues and legal problems, even if the problems have nothing to do with cards.
Small businesses must often deal with such issues but rarely "have a staff of lawyers on call," Mr. Schneider said. The consulting services are a way for Discover to "differentiate" itself "in a meaningful, valuable way."
Dennis Gerhard, Central National's senior vice president of operations, said that his company already has a Visa-branded business debit card, and that Visa requires issuers to offer a zero-liability policy. He would not say exactly how many customers have that card, except to say the number was moderate.
Central National has $428 million of assets, and 12,000 of its customers use its Discover consumer debit card, he said.
His company has not finalized its business debit plans, but it is leaning toward offering two Discover business products, one with a zero-liability policy and one without one, Mr. Gerhard said.
"If I'm going to do zero liability, I'm probably going to be more stringent" regarding evaluating the risk of its business customers, he said. "If I don't do the zero liability, then I may be more willing to allow the business to make their own decisions on those risk points."
