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Total dollar volume on Discover Financial Services’ networks increased 2% in the fourth quarter to hit $80.2 billion versus $78.8 billion a year earlier, but results varied among the company’s payment operations.
Riverwoods, Ill.-based Discover reported Tuesday that the Discover credit card unit posted proprietary volume of $34 billion, up 3% from $32.9 billion in the 2015’s fourth quarter. Discover’s fastest-growing network was Diners Club International, which saw volume grow 8% to $7.33 billion from $6.76 billion a year earlier.
Discover’s Pulse debit card network, however, saw volume decline 1% to $35.6 billion. That was a considerable improvement from the third, second, and first quarters of 2016, when year-over-year volumes fell 6%, 9%, and 15%, respectively. Pulse finished 2016 with total volume of $138 billion, off 8% from $150.1 billion in 2015. And 2015’s volume was down 9% from 2014.
Discover chief executive David Nelms attributed Pulse’s losses to the changes brought on by the Dodd-Frank’s Durbin Amendment, which imposed transaction-routing requirements on debit card issuers and networks. Pulse lost a large card-issuing client in the wake of the post-Durbin jockeying by networks and issuers.
In a Tuesday conference call with analysts, Nelms said he was pleased that Pulse’s volume is stabilizing “after trending down for the last couple of years, due primarily to the competitive response related to the implementation of the Durbin Amendment in 2012,” according to a call transcript from Thomson Reuters StreetEvents. “I believe Pulse is now poised for modest growth in 2017.”
Meanwhile, fourth-quarter volume on cards issued by Discover’s network partners declined 1% to $3.24 billion. For all of 2016, Discover posted total credit and debit card volume of $306.6 billion, down 2% from $312.4 billion in 2015.
Discover network transactions grew 4% in the fourth quarter to 566 million from 546 million a year earlier, while Pulse’s transactions fell 2% to 891 million from 905 million.
Discover’s gets most of its revenues from lending via credit cards and student and personal loans. The company reported fourth-quarter net income of $563 million, up 13% from $500 million a year earlier, on revenues of $2.36 billion net of interest expense, a 7% increase from $2.21 billion in the 2015 period. Fourth-quarter discount and interchange revenue grew 5% to $665 million from 2015’s $635 million.
Also reporting earnings on Tuesday was Total System Services Inc. (TSYS), a Columbia, Ga.-based processor. Boosted in part by its 2016 acquisition of merchant acquirer TransFirst, TSYS reported fourth-quarter revenues of $1.13 billion, up 58% from a year earlier, and net income of $74 million, down 11%. For the year, TSYS posted revenues of $4.17 billion, up 50%, and net income of $319.6 million, down 12%.
