Discover Financial Services's Plan to Thrive in China

Recently, The Motley Fool's Matt Koppenheffer interviewed Jason Oxman, the CEO of Electronic Transactions Association at the ETA Transact 2014 conference.

Oxman has decades of experience as he's worked as the senior vice president of industry affairs at the Consumer Electronics Association, as well as general counsel for the Association for Local Telecommunications Services and vice president at Covad Communications Company. His past and current experiences give him great ability to analyze the climate of the payments technology industry and gauge its evolutionary movements into alternative payments.

In the following video, Matt and Jason explore the international growth of the payment industry and the necessity of company partnerships.

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Matt Koppenheffer: I've sat in on a couple of panels on going international with payments. One in particular, Discover hosted a panel, and I think one of the challenges going forward, it sounds like, is for people in the payments technology industry to understand the different cultures abroad, and to understand the regulations abroad, to be able to really break into these different areas.

I think sometimes, for investors -- because that's who we're talking to a lot -- there's sort of a flipped notion of, "Oh, well, Visa can continue to grow internationally. Discover can grow internationally."

But it's not as easy as that, because there are so many barriers, sometimes, to being able to get that growth. How does this get addressed in the coming years?

Jason Oxman: I think it's very interesting, the idea of international growth, because of course the market is very mature here in the U.S. Any merchant that wants to accept electronic payments will have an option for doing so, here in the U.S.

But outside of the U.S., it's not so robustly competitive a marketplace and there are many merchants who don't have access to forms of electronic payment. Payments is a very heavily regulated industry in the U.S., and around the world so, as you noted, it's hard to run a payments network. It's not as easy as deploying a network, particularly one with a global reach.

You mentioned Discover, in the context of the conversation about international deployment. One thing that's very interesting and, I think, unique about Discover, is Discover offers its network on a wholesale basis to companies that are looking to expand internationally.

They will white-label their network, effectively, and they have some very unique global partnerships.

Koppenheffer: UnionPay, for instance, which is one that they were talking about, which is really cool.

Oxman: UnionPay is a great example because obviously they're a large, sophisticated company, but they want to provide the opportunity for Chinese tourists who are visiting the U.S. to be able to use their UnionPay cards, so if you see a UnionPay logo on a store here in the U.S., that's right on the Discover network, when you swipe your UnionPay card. Similarly, Discover customers can use UnionPay's network when they're visiting China.

They've done a lot of unique programs like that. On the technology side, they have a great partnership with PayPal. The PayPal transmission, when you pay with PayPal at a brick and mortar retailer, that's over the Discover network.

That's the kind of partnerships that we're seeing, and that's the way in which companies are answering the very important question that you raised, which is, how do you even begin to deploy the infrastructure to expand outside of the United States? Well, you do it with a partner who's already done it.

Koppenheffer: Okay, so part of the answer is partnering, and getting creative -- just probably in general -- is a big part of the answer.


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