Frank Rong1

AmEx's Pain Likely Discover's Gain

Morningstar is sure better than most of stock analysts, but I am not a fan of morningstar. they cover too many stocks and try to be expert on everything. Many of their research are flawed.

AmEx's Pain Likely Discover's Gain

Steve,

I have nothing to hide, I am not greencapital, nor MA trader

How Much Credit Is Too Much? Where AmEx Went Wrong

no

Card Issuers: Facts and Fictions

Steve,

Let's move on from this topic, and we can find out what happen to these four companies in two or three years.

I wrote two more articles I want to know how you think

How Much Credit Is Too Much? Where AmEx Went Wrong

STEVE,

Look, I careless about the trial, What I like about DFS has nothing to so with the lawsuit. As you know, the Visa bylaws was put in place in 1992, specifically against DFS. The problem DFS had over the years is acceptance, It was accepted far less places than Visa, the reason is simple, like I told you, Visa banned acquiring banks from doing business with DFS. That damage is huge. Who signs up merchant for acceptance? Acquiring banks, there are thousands of places that you can sign up to accept credit cards, but these places will not let you sign up for Discover. Why? because Visa told them, look, if you let merchants to take Discover, we will not let you do business with US again.

Forget about the past, let us look into the future, the truth are self-evident, the question is steve, can you handle the truth?

Discover has 18 million active users, Amex has about 23 millions. Discover card is not used as often as Visa for one simple reason, i.e. too many places did not take Discover Card. That's about to change for good. by early next year, Discover should reach parity, and it can partner up with merchants encourage more usages of Discover card, which means more money for DFS.

Visa on the other hand, will be looking at renew contracts with banks, Banks want to keep more of Visa's share of revenue, or they will move, no royalty there. Imagin sit down with Jamies Dimon or Ken Lewis, they will get very large concessions from them. Ken lewis even threaten to start a new network to compete against Visa.

How Much Credit Is Too Much? Where AmEx Went Wrong

V winner,

I am a value investor, I am not a friend of "GC", I am long DFS since it's the cheapest stock, yet this a great business. I figure DFS can earn about $2.50 a year, so it sells for 6 times normalized earning. comparing to V and MA, they sell for 30 tmes earning.

How Much Credit Is Too Much? Where AmEx Went Wrong

Thank you everyone for your comments, 41% of household make over 150,000 use an Amex card vs. 40%. Discover is a very successful buisness by any measure. Who are the rich? The rich people tend to be smart with their money, getting the best deal and in many ways they are frugal. Lots of "rich people" use Discover Card.

Amex cardholders tend to like to show off. In fact I know many people really broke, wrote bounced checks and carry an Amex Card. Amex has 23 million active users in the US, and I don't think we have that many rich people in US.

Enjoy your weekend,

Frank

How Much Credit Is Too Much? Where AmEx Went Wrong

1. Citi's card issuing business is a tiny part of its whole operation? It's a huge part, it's the only part that's making money for Citi. Citi is the third or fourth largest issuer in US. its card division brought in more than $3 billion in net income in 2007.

2. Discover's credit limits are low because they are targeting the low FICO, high risk sorts of people? Discover has been the best underwriter in the last few years. Discover Card is the hardest one to get.

3. Amex is a still great business, it's a business even an idiot can run it.

Why Visa Should Thrive

VWinner,

what do you think?

Why Visa Should Thrive

I think MasterCard might miss earning tommorrow, as Visa is taking more business from MasterCard.

Like I said earlier, rebates are going up , way up, by 58% in fact, from 175 Million to 274 million dollars

Visa faces a potential price war with MasterCard, which could lead to the defection of large clients

Why Visa Should Thrive

V Winner,

here's a link to show how large banks' shares of Visa's Volume
www.nilsonreport.com/p...

Visa simply can not afford to lose any of these top ten issuers to either MasterCard or Discover

Why Visa Should Thrive

V Winner,

Other 50 lawsuits are bogus B.S. I don't expect Visa would pay anything for these lawsuits, they all centered on the perception that Visa was over-charging merchants, but these allegation are bull shit. Merchants were willing to take Amex for a fees significantly higher than Visa for years, why then bitching about fees that are lower than you are willing to pay (Amex fees)?

Why Visa Should Thrive

V Winner,

I owned MA and then sold it its legal problems, MasterCard could not get an investment grades from Moodys and Fitch due to its legal issues. Discover in fact can make a very good argument here against V and MA, due to banning acquiring banks from signing merchants for DFS, Its US acceptance was only half of Visa's. That did lots of damage to Discover business. That's not a question. The question is how much, and these damage are tripled under federal aniti-trust laws.

I think the potential damages to Discover is much higher than Amex got from the settlement

Why Visa Should Thrive

V Winner,

I figure there are probably plenty of business for all four networks. I disagree with you on whom uses Discover cards, In fact, among Discover cardholders, many of them are rich. By the way, how do you become rich? Being very cheap. I use a Discover card since my freshman year in college. Cashbacks, ShopDiscover are few rewards attract lots of cheap people. I don't use Amex to show off. In fact, I know lots of people who are completely broke and use Amex cards. The no.1 Problems Discover had was acceptance. Who are the ones signing up merchants? Aquiring banks or merchant acquirers. V/MA banned Acquiring banks from signing up Discover for Merchants. In many cases, that helped Discover, and that's the reason why we only have four networks.

Starting a new network is probaly too hard. There are 7.2 retailing locations accepting Visa and MasterCard, another 20 locations outside of US. So to build a global networks are mission impossible. I don't think it can be done. Do you?

You are asking why Discover has not signed up more card issuers? It's very simple, the card issuers had already owned their own networks - Visa and MasterCard. It's the same reason Discover will not issue Amex Card. Visa and MasterCard allocated their IPO shares based on the cards banks issue. So if banks switch and issue Discover card, they will not get any Ma/V IPO shares. I love to have some shares, wouldn't you? That's why no one switch to Discover, except few issuers.

But now, both V/MA are independent, and lots of issuers sold their stocks in V/MA, the table will start to turn. Prospect of getting more issuers to issue Discover Cards will get much better.

Anyway, Like I said, there are plenty of business for everyone, especially globally. Visa can jack up merchant fees one penny here, two cents there to make earning look very good.

Why Visa Should Thrive

Discover is big enough to compete. ($220 Billion on both Discover network and Pulse), and small enough to grow very fast.

V has 2.5 trillion volume, law of large number suggests that it can grow no higher rate than the overall industry.

Anyway, I think all four networks are going to do extremely well. how much do you think MA and V going to pay to Discover for their past sins (exclusionary rules)?