Discover’s second quarter results showed continued good growth at Diners Club but payment volume from third party cards running over Discover’s Global Network (DGN) fell sharply.
Diners Club, which is still largely a series of national franchises, saw an 18% increase in volume, totalling $9.9 billion, driven by the ongoing rebound in global travel and entertainment (T&E) and corporate spending.
In contrast, DGN, which counts cards from 25 third-party schemes such as SIBS and RuPay cards running over Discover rails when used outside their home country, experienced a 10% decrease in payment volume to $10.4 billion. Logically, these should also benefit from the current boom in travel and tourism but the company merely attributed the disappointing result to “lower transaction volumes.” It declined to give further explanation.
Discover continues to invest in DGN and Roger Hochschild, CEO, highlighted five new partnerships signed in the quarter including Guavapay, a low-profile UK issuer/processor. DGN also expanded its acceptance network with the addition of Phos, the SoftPOS start-up recently acquired by Ingenico and Tyl from Natwest.
Management also revealed that Discover had been over-charging its merchant and acquirer customers since 2007 and would be taking a $365m provision to refund the cash. The issue stems from misclassification of certain cards into hits highest interchange bracket. Individual amounts repaid will likely be quite small but involve a very large volume of customers, many of whom may be difficult to track down. This is going to be quite a project for the unlucky team that gets landed with it.
