Discover’s Payment Volume Rises 10%, but Pulse Treads Water

Discover Financial Services saw its overall dollar volume increase 10% year-over-year in the second quarter despite a flat performance by Discover’s Pulse debit network.

Riverwoods, Ill.-based Discover said late Wednesday that total payment volume in the quarter ended June 30 was $138.7 billion versus $125.6 billion in the year-earlier period. Proprietary volume on the Discover credit card network jumped 18% to $55.8 billion from $47.2 billion in 2021’s second quarter.

Pulse’s volume came in at $63 billion, virtually unchanged from $62.9 billion a year ago. Discover attributed Pulse’s performance to the changing economy as the nation recovers from the Covid-19 pandemic, which boosted debit volumes as federal relief dollars enabled house-bound consumers to spend heavily on groceries and essential goods. “Pulse dollar volume was flat year-over-year primarily driven by receding spend on debit products related to the end of federal stimulus programs,” the company said in its earnings report.

In another sign of pandemic recovery, Diner’s Club, Discover’s travel-and-entertainment and corporate card, saw volume on cards issued outside North America jump 37% to $8.38 billion from $6.13 billion in 2021’s June quarter. Discover cited an “improvement in global T&E spending” for the increase.

Volume from Discover’s network partners totaled $11.5 billion, up 22% from $9.47 billion a year earlier.

Discover’s payments business, which is dwarfed by the parent company’s credit card and student loan lending operations, is “an underutilized asset,” Robert Napoli, an equity analyst at Chicago-based William Blair & Co. who covers payments, wrote in a research report Thursday.  Discover partners with U.S. merchant acquirers and foreign processors to increase acceptance of its cards, and its network now has more than 48 million merchants and 2 million ATM locations, Napoli said. “The company continues to invest to buil[d] out its acceptance footprint, particularly internationally,” Napoli said. He noted that an agreement Discover signed last month with the Italian processor Bancomat should give the company’s cards virtually universal acceptance across Italy.

Despite the generally strong second-quarter performance by the payments unit, Discover’s stock was trading down 9% late Thursday morning, possibly because of investor uncertainty about a pause in the company’s share repurchase program and an internal investigation into compliance and servicing issues involving student loans, according to the William Blair report.