Discover plans to add mortgages, checking accounts
Mar 24, 2012 (Chicago Tribune - McClatchy-Tribune Information Services via COMTEX) --
Discover Financial Services, known for its orange-hued credit cards, plans to launch this year an online mortgage origination business -- with a goal to become as big as Quicken Loans -- and expand its suite of banking products to include checking accounts.
The Riverwoods-based company offers student and personal loans, as well as various types of savings accounts on its Web-based Discover Bank.
At an investor day in New York Thursday, company officials said they continue to be emboldened by changes in how consumers do their banking, with an increasing preference for using computers, smart phones and iPads. In 2007, 57 percent of consumers said they preferred to bank through ATMs or in branches, compared with 36 percent in such direct channels as online or over the phone, Discover said, citing an American Bankers Association study. Last year, 28 percent said that branches or ATMs were their preferred banking method, with 72 percent now saying they prefer direct channels.
"This trend has transformed the way consumers buy books, get boarding passes for a flight, and watch movies," said Carlos Minetti, Discover's executive vice president for consumer banking. "Financial services is no exception."
Because it's not burdened by a costly retail banking structure, Discover can offer higher rates and low-cost accounts, he said.
Discover is running a pilot program for a no-fee checking account that also has mobile banking features.
"Maintenance fees for checking accounts are becoming increasingly common, and we believe our no-fee product will be a welcome option for our consumers," Minetti said.
Discover Bank holds $27 billion in deposits.
He said that Discover customers have also been asking the company to get into the home-loan business, which it will also conduct online. He said that Discover's home loan center has about 300 licensed mortgage bankers. Discover is buying the mortgage origination business of Tree.com Inc.
"Our goal is to be as large as Quicken Loans is today," Minetti said. In 2011, Quicken, an online home lender, closed a record $30 billion in retail home loan volume nationwide.
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