Discover looks to grow in 2016 (DFS)

Discover looks to grow in 2016

This story was delivered to BI Intelligence "Payments Industry Insider" subscribers. To learn more and subscribe, please click here.

After a tough 2015, Discover posted Q1 2016 earnings figures that point to growth in the year ahead.

Discover’s total payment volume (TPV) continues to fall overall.

• Discover’s Q1 2016 TPV was $73.5 billion, a figure that’s down both sequentially and year-over-year (YoY). For context, Discover posted TPV of $77.6 billion during the same period last year.
• But the decrease is largely because of volume declines from PULSE, Discover’s debit network. Discover posted volume growth among its proprietary cards, Diners Club cards, and Network Partners' processing business. But a 15% PULSE volume decline was enough to offset that growth and drive down the firm’s overall TPV last quarter.

Discover plans to grow overall payment volume 10% in 2016, however. The firm plans to do this in two ways:

• Adjusting PULSE: In its earnings call, Discover asserted that PULSE volume should stop falling and begin to stagnate after Q1, which should offset TPV declines. And after 2016, Discover hopes to turn PULSE around and focus on growing the program, which could help promote overall TPV growth.
• Using rewards to drive proprietary spend: It’s logical to think that Discover plans to focus most heavily on its proprietary card business. And it’s likely the firm will do this by continuing to engage and attract customers with its robust rewards program. Most notably, Discover plans to continue offering new customers a double rewards bonus for at least one additional quarter. That bonus, which lowers acquisition costs, could help Discover attract more customers for fewer dollars while incentivizing them to spend more. That, in turn, could boost TPV in the long-term.

Every subscriber to the BI Intelligence "Payments Industry Insider" newsletter received this story first thing in the morning, along with other insightful and informative content. To learn more and subscribe, please click here.