While the volume of payments on Discover cards for the quarter ending on Dec. 31 dropped 3% compared to the year-ago quarter — falling from $57.15 billion to $55.25 billion — it was up 3.5% from $53.38 million in the third quarter last year.

“Holiday sales were strong and we currently see an opportunity to increase new account acquisition in the coming year,” Greene said on the call.

The increased revenue from interchange income was the result of increased cashback debit volume and a lower rewards rate, Greene told analysts.

The rewards rate on Discover cards fell to 1.35% in the most recent quarter, compared to 1.44% in the third quarter in 2023.

Company executives also gave an update on Discover’s merger with Capital One Financial Corporation.

“Capital One received approval of the merger from the Delaware State Bank Commissioner and our definitive merger proxy has been transmitted to shareholders in connection with the upcoming shareholder votes,” Greene said. “Integration planning efforts are progressing well in preparation for a smooth transition.”

McLean, Virginia-based Capital One announced a proposed $35.3 billion acquisition of Discover in February 2024.

Consumer advocates have criticized the deal, saying the combined company would have too big a share of the market for subprime credit cards and could raise prices for low-income cardholders. Discover interim CEO Michael Shepherd, however, sounded an optimistic tone in Thursday’s earnings call.

The results were “better than expected,” Jefferies analyst John Hecht wrote in a note to investors.

“Investments in compliance, risk management, and a simplified business structure have primed the company for the merger with [Capital One],” he said

By Patrick Cooley on Jan 24, 2025
Original link