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Discover® Company Profile |
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New York-based Morgan Stanley is an investment banking firm also known for operating the Discover credit card subsidiary. Currently, the company employs over 55,000 employees, including thousands of workers in their Asian and European branches. In 2005, Morgan Stanley's earned revenue in excess of $52 billion.
Since June 2005, Morgan Stanley has been headed by John J. Mack, who is currently under investigation by the Securities and Exchange Commission (SEC) for insider trading allegations. Mack had been president of Morgan Stanley between 1997 and 2001 but left his post after the acquisition of Dean Witter. In 2001, he was replaced by Philip J. Purcell who was Dean Witter's CEO. In March 2005, eight Morgan Stanley senior executives requested that Purcell be immediately replaced because of the company's disappointing performance. He announced his retirement three months later.
Early Company History
Morgan Stanley was founded in 1935 after the Glass-Steagall Act forced a split between commercial and investment banks. J. P. Morgan handled the commercial banking while Morgan Stanley focused on investment banking.
By 1936, Morgan Stanley had acquired a 24% market share and five years later joined the New York Stock Exchange. In the mid-1960's Morgan Stanley became the first firm to develop a computer program to handle financial analysis.
A few years later, the company opened its first branch outside of the United States. Located in Paris, this branch was focused on allowing Morgan Stanley to enter the growing securities market in Europe. In 1975, the company created Morgan Stanley International Incorporated and based this new office in London, England. The company continued to grow internationally during the 1980's with new branches popping up in Australia, Switzerland, Germany, Hong Kong, Italy, and Japan.
In the 1980's, Morgan Stanley also became the first investment firm to automate the processing of trades.
The first half of the 1990's was a period of continuing growth for Morgan Stanley. They expanded their international branches to include locations in Russia, India, China, Taiwan, Singapore, Brazil, South Africa, and Mexico. In 1994, they were the only foreign company to participate in China's first joint venture operation.
In 1997, Morgan Stanley and Dean Witter (which first formed in 1924 in San Francisco, California) merged.
Credit Card History
In 1981, Dean Witter jointed Sears, which at the time was the largest retailer in the United States. Sears wanted to expand its customer services to include financial products. This desire eventually led to the launch of the Discover credit card in 1985 (the launch expanded nationally in 1986).
Although other companies had attempted and failed to introduce competing credit cards into the market dominated by Visa, Mastercard, and American Express, Sears was successful. Unlike the other credit cards available at the time, Discover cards did not require users to pay an annual fee. The card was also the first to introduce a cashback reward program. A percentage of a customer's charges were paid back to the user annually.
While the Discover credit card did attract a solid base of consumers, the card did not benefit Sears. Because Sears stopped accepting other credit cards after launching Discover, many customers refused to shop there and they lost revenue. Other retailers also refused to accept the Discover card because Sears was a competitor.
In 1993, Sears spun off its financial services into Dean Witter Discover. After the merger, Discover card became a subsidiary of Morgan Stanley.
In 2004, the subsidiary – known as Discover Financial Services – went to court claiming that Visa and Mastercard were illegally excluded them from certain aspects of the credit services industry. Specifically, Visa and Mastercard were not allowing banks which issued their credit cards to also issue Discover cards. The courts ruled in favor of Discover.
A year after the ruling, Discover acquired PULSE, an electronic funds transfer (EFT) service, that allows them to begin offering debit cards. They also formed a deal with GE Consumer Finance to issue their cards.
In April 2005, Morgan Stanley announced that it was going to sell off Discover Financial Services but by August of the same year they had changed their mind and decide to hold on to the credit card service.
Discover Card Acceptance
Discover credit cards are widely accepted in the United States. Its 50 million card users can pay for purchases at over 4 million retailers and can use the card at more than 4,000 ATM machines nationwide. In fact, Sam's Club warehouse stores will only accept credit cards that have been issued through the Discover Network.
In 2005, Discover formed a partnership with China UnionPay which allows their credit cards to be accepted at locations in China. This move made Discover the most widely accepted U. S. card in the country. A similar agreement was reached in Japan. An arrangement with UK-based Link ATM also allows Discover card holders to access over 58,000 ATMs in England.
Despite these arrangements, the acceptance of Discover card outside the United States is limited. Most retailers in Canada and Europe do not accept the card.
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