Discover Opens Tech Development to Keep Pace with Nimble Startups

CHICAGO — The mobile commerce revolution is pressuring legacy payment companies to quickly diversify to stay relevant, leading Discover Financial Services to build a gateway where merchants can add digital transactions and other services.

"New players are upping the bar, essentially developing technology we didn't know we needed," said Amy Parsons, vice president of strategic merchant relations at Discover Financial Services.

In seeing that trend, as well as feedback from its own customers, Discover is developing a Discover Digital Exchange platform to provide merchants moving into the digital space with security and various controls for customer engagement and application development, Parsons said during a presentation Sept. 2 at the annual Mobile Payments Conference.

"We are not doing it to put Discover all over everything," Parsons said. "We want to help merchants move into digital funding sources, prepaid and value-added programs, even for private label cards and merchant-controlled apps."

The Riverwoods, Ill.-based Discover earned the top spot last month in J.D. Power's customer satisfaction poll, besting American Express for the first time in the survey's nine years, with a focus on customer experience that is fueling the digital services model.

One example of the strategy is Discover's Freeze It technology, which enables cardholders to "pause" a plastic card through a mobile app if it is misplaced or feared stolen. "We started with a 24/7 service for customers to call us, but now we are seeing they don't want to interact with us on the phone as much," Parsons said. "They want online chat or a mobile app to control their own card."

Companies such as Postmates, which delivers products or groceries to users in less than an hour, or Moosejaw and Airbnb, which emphasize customer engagement and quicker buying experiences, are setting new standards for digital play, Parsons added.

"You have to engage the consumer across many touchpoints and embed the digital thought process everywhere, including in the people who work for you," Parsons said.

Discover tests various technologies, sometimes as a way to simply keep abreast of what is occurring in the industry, more so than to develop a technology it can call its own, Parsons said.

Discover has been testing biometrics at its Riverwoods headquarters since late in 2013, working with French provider Natural Security.

"We are constantly testing, because it's an important step in how you learn," Parsons added. "It would be easy to just wait and see, but that's a dangerous approach because when it comes time, you are not sure whether to adopt a technology or not."

As part of the Discover Digital Exchange process, it will be important "to monitor how people are paying for things and see how the trends go," Parsons said.

Parsons' comments echoed what other Discover executives have pointed out in the past, with executive vice president of payments Diane Offereins noting the changing payments landscape a year ago when saying technology companies entering the industry look upon transactions as a secondary measure to other marketing, customer engagement or experience goals.

In general, the major card brands don't want to be left behind when cutting edge technology for security or an enhanced customer shopping experience mixes with payments.

MasterCard last month began a test it announced previously for facial and fingerprint biometrics with First Tech Federal Credit Union, effectively bringing "selfies" authorization to the forefront.

Meanwhile, Visa has been promoting its Visa Digital Enablement Program for several months, offering its tokenization technology at no cost through the end of this year.