Digital Transactions Authoritative, insightful and timely information for payments professionals
By Jim Daly and Kevin Woodward
American Express Co. saw total revenues and profits decline by 4% in the second quarter, but its OptBlue program has added 700,000 small merchants this year. Meanwhile, Discover Financial Services reported late Wednesday that its Pulse volume fell after losing a large issuer.
New York City-based AmEx on Wednesday reported total revenues, net of interest expense, of $8.28 billon versus $8.63 billion in 2014’s second quarter, and net income of $1.47 billion against $1.53 billion a year earlier, when AmEx had a one-time gain from the sale of its business-travel operation. Also, the strong U.S. dollar negatively affected AmEx’s international results.
Worldwide card-billed business inched up 2% to $262 billion from $258.1 billion a year earlier. U.S. card-billed business rose 5% to $181.6 billion while international volume slipped 5% to $80.4 billion. Adjusted for foreign-currency effects, however, international volume was up 9% and total volume increased 6%, AmEx said. Discount revenue generated by card charges grew 1% to $4.95 billion.
Chief financial officer Jeff Campbell told analysts in a conference call that AmEx has booked 700,000 small merchants year to date for AmEx acceptance under the company’s OptBlue program. AmEx is now taking the program, which employs bank card acquirers to sign and manage the merchants, to Canada, Campbell said.
American Express is preparing to fill a big hole next year when it will lose its U.S. cobranded card program with Costco Wholesale Corp. as well as its acceptance privileges at the huge warehouse retailer. The Costco card accounted for 8% of AmEx’s worldwide charge volume in 2014. Costco’s new cobranded issuer will be Citigroup Inc., and Visa Inc. will be the only general-purpose card brand Costco will accept.
AmEx also is dealing with a federal court decision overturning its anti-steering rules for merchants and the unexpected death in late May of its No. 2 executive, president Edward Gilligan.
Chairman and chief executive Kenneth I. Chenault says AmEx will be focusing on adding cardholders, gaining more business from its consumer, small-business, and middle-market customers, growing internationally, expanding its merchant network, and introducing new digital capabilities. One new AmEx initiative is the AmEx-managed Plenti multimerchant rewards program, which Campbell said has 20 million users.
“We continue to see opportunities across the company and this quarter marked the initial stage of a ramp-up in investment spending on growth initiatives,” Chenault said in a statement. “As planned, we expect to increase our investments substantially in the second half of the year.”
At Discover Financial Services, the Riverwoods, Ill.-based issuer and acquirer says its second-quarter revenue for its Pulse debit network was $37.2 million, a 10.4% decrease from $41.5 million in the same quarter a year ago.
Transaction volume on Pulse decreased from 1.09 billion to 989 million, a 9.3% reduction. Discover executives cited the loss of a large issuer, which they would not name, for the volume drop.
Total transactions on Discover's credit and debit networks fell 6.4% from 1.604 billion to 1.501 billion and dollar volume went from $81.19 billion to $78.56 billion, a 3.2% decrease.
“Focusing on payments, total volume was down 3% as increases in our proprietary volume and growth in our business-to-business volume were not enough to offset year-over-year declines at Pulse,” David W. Nelms, Discover chairman and chief executive, told analysts during an earnings conference call Wednesday.
Overall for the quarter, Discover says it had a net income of $599 million, a 7% decrease from $644 million a year ago.
Discover also said it spent $8 million in the second quarter on EMV costs.
Discover provided no update on a Pulse lawsuit against Visa Inc. over alleged antitrust issues.
