Discover Financial Services has bounced back from the pandemic’s spending slowdown, with credit card sales up 28% over the same period a year earlier while its Pulse debit network also saw solid gains.
Even Discover’s Diners Club charge card’s payment volume rose 12% for the quarter ended Sept. 30, despite ongoing choppiness in global travel, Discover said.
“We’re now back to elevated loan growth, and even though we saw a bit of downward pressure in travel sales in August and September from the COVID-19 delta variant, overall travel spending rose during the quarter,” Roger Hochschild, Discover’s CEO, said in an interview.
So far the booming buy now/pay later market has not dented Discover’s credit card sales, according to Hochschild.
“We haven’t seen any impact from BNPL on our revolving balances — I think a lot of people view this as an alternative to private-label loans,” he said.
Discover has hedged its bets on BNPL through a partnership with Minneapolis-based Sezzle, which uses Discover’s network to provide a point-of-sale connection to consumers. Discover also may expand its installment-lending role if it sees more demand, Hochschild said.
“As a card issuer, we’re still exploring the space. I think the economics in BNPL are not yet mature, and the concept may become more expensive for providers in a normal [higher] interest rate environment,” he said.
Although revenue for the quarter rose only 2% on a loss on equity investments, Hochschild is bullish on Discover’s outlook for the rest of the year, despite headlines about supply-chain snarls potentially weighing on fourth-quarter shopping.
“Supply chain issues are real, but there is still a lot of merchandise on the shelves and because of some of these concerns consumers will be encouraged to shop early, so I think we’re going to see continued strong spending,” Hochschild said.
Discover has deals in place with PayPal and Amazon enabling consumers to use Discover rewards points to make online purchases, and these arrangements drive strong engagement, he said.
“It’s been the fastest category of points redemption. Once a customer sets up to redeem points with Amazon, they keep doing it,” Hochschild said.
Discover’s Pulse debit network is benefiting with more everyday and restaurant debit purchases going online and in-app. Pulse’s volume rose 9%, to $60 billion, during the third quarter over the same period a year earlier.
Discover reported its profit for the quarter rose 42% to $1.1 billion. Revenue was $2.7 billion, essentially flat year over year.
