What the Industry’s Past Teaches About the Future
During its more than 40 years in business, PULSE has been at the forefront of debit’s growth. What began as a simple solution to a straightforward challenge – facilitating ATM sharing by financial institutions in Texas – has evolved into a network supporting cash access around the world and all forms of debit payments. For most of those years, Dave Schneider, President of PULSE, has been involved.
Now in his third decade at PULSE, Schneider sat down recently for a conversation with Steve Sievert, the company’s Executive Vice President of Marketing and Brand Management, to explore how the industry has changed through the years – and how the company can continue to meet the needs of our clients into the future.
Steve Sievert: You have either worked with or for PULSE for 35 of its 40 years. Take us back to those early days and tell us what led to the creation of PULSE.
Dave Schneider: I think of PULSE as one of the original fintech disruptors. In 1981, ATMs were a new technology that generated wonder and excitement, much like you see today with regard to the latest innovations in financial services.
From the very beginning, PULSE was focused on enhancing convenience and solving problems. The original idea was to use ATMs to expand a consumer’s access to their funds on deposit and reduce the demand for teller transactions. We quickly recognized that high-volume check and cash merchants didn’t have many alternatives to paper payments, and many consumers did not carry a credit card. So, the idea of taking that ATM card and introducing it into a point-of-sale environment emerged. It was a way to leverage the capabilities of our network for the benefit of consumers, issuers and merchants.
Sievert: How did that system expand into a broader payments network?
Schneider: We continued to look for ways to expand the use and value of debit by taking it into places that were not serviced by card-based payments. In the late '80s, we launched one of the very first electronic benefit transfer programs to deliver veterans’ benefits on a debit card. We also launched telephone bill payments as a way for consumers to pay utility bills using their debit card. In the '90s, we added signature debit processing services and supported the launch of one of the first general-purpose prepaid debit card programs. The effort to expand debit usage continues to this day.
Sievert: What led to the company’s sale to Discover®, and what did that mean for PULSE?
Schneider: Beginning in the early 2000s, we recognized that continuing to grow the network would require increased investments. That was difficult to accomplish as a nonprofit membership association. As a result, PULSE’s Board of Directors, comprised of representatives of participating financial institutions, challenged the staff to explore our options and identify potential partners. This process culminated in a proposed sale of the network to Discover, which was approved by a vote of our financial institution members. Discover’s acquisition of PULSE enabled us to accelerate the expansion of our network capabilities to support all forms of debit.
Sievert: How did that expansion impact the company’s day-to-day approach?
Schneider: One of our first big steps was to enable PINless debit at the point of sale, a priority for some of our largest merchants. We also anticipated the shift to digital by building the infrastructure required to support e-commerce and person-to-person payments.
Expanding the types of transactions supported on our network also came with increased risk, as compared to PIN-authenticated debit. As a result, we added services to help our issuers detect fraud while also maintaining a good user experience for cardholders. These services include our DebitProtect® fraud-detection platform, along with enhanced processes for handling disputes.
Sievert: Many of these advances relied on new technology. Do you believe the changes going forward will require significant, additional technology investments?
Schneider: That depends. Technology is certainly critical to achieving our business objectives. It is advancing rapidly, and in some cases the cost is actually coming down. But it is important to remember that technology alone is not a strategy – it is one of many tools that can be used to execute a strategy. Our approach is to begin by asking, “What problem are we trying to solve?” Only after answering that question can you determine the best way to proceed, which may include additional investments in technology. And given that technology is also available to our competitors, it does not provide long-term differentiation. The differentiator for us is working closely with our clients to understand their problems, and then designing cost-effective, user-friendly solutions to those problems. We believe that approach is why we’re still here after more than 40 years.
Sievert: The past couple of years have been particularly challenging. How did the company adapt to the pandemic?
Schneider: I could not be more proud of the way everyone at PULSE, and across Discover, responded to the challenges presented by the pandemic. Literally overnight, we shifted to working remotely, and truly never missed a beat. From a payments perspective, the pandemic accelerated the trend toward digital commerce that we were already experiencing, and the changes in consumer behavior appear to be permanent. Our business results over the past two years confirmed the value and importance of debit, especially during periods of financial stress. These results also confirmed that we were well prepared for this moment.
Sievert: So how do we, as a brand and as a network, continue to pursue the mission to compete for all debit and make sure we are ready for the future as it unfolds?
Schneider: It requires having the right people, the right culture and the right vision. It also requires us to stay focused on the needs of our clients. If they are successful, then we will be successful.