Discover 2009 Annual Report Download - page 15

Installment Loans
In addition to credit cards, we offer installment loans, including personal loans and student loans. We have grown our
installment loans significantly, from $1.4 billion at November 30, 2008 to $3.4 billion at November 30, 2009. We offer
our installment loans to new and existing customers online, by phone and by mail.
Our personal loans are unsecured loans with fixed interest rates, fixed terms and fixed payments, and are primarily
intended to help customers consolidate existing debt, although they can be used for any reason. In addition to the interest
earned on our personal loans, we also earn loan origination fees on some of our personal loans and fees from customers
that enroll in our payment protection product. We generally market our personal loan products to our credit card
customers, although we also market personal loans more broadly. Our student loans include federal and private loans
that help students and parents finance the costs of attending post-secondary educational institutions. Our federal student
loans are available to cover education costs at schools that participate in the U.S. government’s Federal Family Education
Loan Program (“FFELP”), and are 97% guaranteed by the federal government. Our private student loans are available to
cover education costs at select schools offering undergraduate and graduate degree programs and are available to
students with or without a cosigner. All of our private student loans are certified by schools as part of the approval
process to prevent over-borrowing and are disbursed through schools to ensure proper use of loan funds.
Deposit Products
We offer deposit products, including certificates of deposit, money market accounts, online savings accounts and
Individual Retirement Account (“IRA”) certificates of deposit, to customers through two channels: (i) directly through direct
mail, internet origination and affinity relationships (“direct-to-consumer deposits”); and (ii) indirectly through contractual
arrangements with brokerage firms (“brokered deposits”).
In 2009, we significantly increased our direct-to-consumer deposits to $12.6 billion at November 30, 2009, up from
$6.2 billion at November 30, 2008, and we expect to continue to grow our use of this deposit channel in 2010. We
maintain a dedicated deposit products call center and an internet site to allow prospective and existing customers to
apply for, fund and service their accounts. We market our deposit products to our credit card customers and also use
industry rate comparison web sites, paid search campaigns, print advertising and affinity arrangements to offer our
deposit products to prospective customers. As of November 30, 2009, 41% of our direct-to-consumer deposit account
holders were also credit card customers. For more information regarding our deposit business, see “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Funding
Sources – Deposits.”
Payment Services
Our Payment Services segment, formerly referred to as our Third-Party Payments segment, includes PULSE, our ATM,
debit and electronic funds transfer network; Diners Club, our global payments network; and our third-party issuing
business, which includes credit, debit and prepaid cards issued on the Discover Network by third parties.
PULSE Network
The PULSE Network is one of the nation’s leading ATM/debit networks. PULSE links cardholders of more than 4,400
financial institutions with ATMs and point-of-sale (“POS”) terminals located throughout the United States. Beginning in
2009, PULSE also provides cash access at an increasing number of ATMs in over 30 countries. PULSE’s primary source of
revenue is transaction fees charged for switching and settling ATM, personal identification number (“PIN”) POS debit and
signature debit transactions initiated through the use of debit cards issued by participating financial institutions. In
addition, PULSE offers a variety of optional products and services that produce income for the network, including
signature debit processing, prepaid card processing, and connections to other regional and national electronic funds
transfer networks.
When a financial institution joins the PULSE Network, debit cards issued by that institution can be used at all of the
ATMs and PIN POS debit terminals that participate in the PULSE Network domestically, and the PULSE mark can be used
on that institution’s debit cards and ATMs. In addition, financial institution participants may sponsor merchants, direct
processors and independent sales organizations to participate in the PULSE PIN POS and ATM debit service. A
participating financial institution assumes liability for transactions initiated through the use of debit cards issued by that
institution, as well as for ensuring compliance with PULSE’s operating rules and policies applicable to that institution’s
debit cards, ATMs and, if applicable, sponsored merchants, direct processors and independent sales organizations.
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