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Total charge volume on Discover Financial Services’s networks fell 5% in the first quarter thanks to a 15% drop at the Discover-owned Pulse electronic funds transfer network. But U.S. Bancorp, which owns the big merchant acquirer Elavon, says its merchant-processing revenue increased 4% due to higher transaction volumes and sales of EMV chip card terminals to merchants.
Riverwoods, Ill.-based Discover, which gets 96% of its pre-tax revenues from credit card lending and direct-banking services, reported total network charge volume of $73.6 billion in the first quarter, down 5% from $77.6 billion a year earlier. Three of the four major components of Discover’s Payment Services segment posted volume increases, but Pulse’s volume fell to $34.7 billion from $40.8 billon in 2015’s first quarter.
“Pulse transaction dollar volume was down 15% year-over-year due to the loss of volume from a large debit issuer,” Discover said in a statement Tuesday. The company did not identify the issuer.
In addition to the loss of the big issuer, Pulse lost business after Visa Inc. took steps to re-boot its debit card business after the Durbin Amendment initially caused about half of Visa’s PIN-debit volume to switch to competitors. The amendment required debit issuers to offer merchants at least two unaffiliated networks for transaction routing. But now Discover chairman chief executive David W. Nelms expects Pulse’s volumes to stabilize.
“It feels like we have reached a plateau with Pulse, and I think after this year what we’re looking to do is to go back to growing Pulse,” Nelms said in a conference call with analysts, according to a call transcript from Thomson Reuters StreetEvents.
Charge volume on the Discover credit card network grew 5% to $28.6 billion while volume on the Discover-owned Diners Club International network increased 4% to $6.7 billion. Volume generated on Discover’s Network Partners system grew 21% to $3.6 billion in large part due to increases in the Ariba business-to-business network.
Discover said first-quarter pre-tax income in its Payment Services segment increased 19% to $32 million. The company announced Wednesday that it had struck a deal with Bamberg, Germany-based payment-services provider Computop that will enable online acceptance of Discover, Diners Club and affiliated cards by Computop’s 10,000 merchants.
Meanwhile, Minneapolis-based U.S. Bancorp on Wednesday reported that total payments-related fee income increased 5% to $809 million from $770 million in 2015’s first quarter. Merchant processing generated $373 million versus $359 million a year earlier because of higher volumes and equipment sales to merchants. The bank did not disclose transaction numbers.
Interchange and other fee income from the bank’s credit and debit card transactions increased 10% to $263 million thanks to higher transaction volumes, some of which came from portfolio acquisitions. ATM processing revenue increased 3% to $80 million.
