The cost of providing rewards on Discover cards is rising three times faster than the income earned from interchange/discount revenues, according to CardData. As one of the top U.S. credit card issuers Discover is renowned for its generous cardholder reward programs, including its new “it” card.
During the first quarter of 2014 (Q1/14) Discover spent $265 million on rewards, compared to $295 million in the fourth quarter and $229 million in the year ago quarter. Year-on-Year (Y/Y) the increase was 15.7%.
Meanwhile, Q1/14 revenues generated from discount/interchange rose 5.5% to $519 million, compared to $492 million in Q1/13. In the prior quarter Discover produced $574 million in discount/interchange revenue.
Overall, the net discount/interchange revenue (minus rewards costs) declined 3.4% to $254 million, compared to $279 million in the prior quarter and $263 million in the year ago quarter.
Discover reported that total revenue for Q1/14 (net of interest expense) was up $86 million, or 4%, from the prior year to $2.1 billion.
RAM Research predicts Discover total revenue will top $2.2 billion in the second quarter.
RESOURCES:
For more data on Discover access CardData®. For information and commentary on International Discover visit the searchable CardFlash® Library of more than 58,000 articles published since 1995. Custom RAM Research® projects on Discover are available exclusively through CardWeb.com.®
