Tag Archives: Discover

Card networks report strong growth in credit and debit card spending

Visa and MasterCard both reported quarterly financials this week, which enables us to develop a picture of how the four main U.S. card networks (Visa, MasterCard, American Express and Discover) performed in terms of card volume.

See the table below for details on the card networks’ total U.S. card volume for 1Q11, with comparisons to 1Q10. Note:

  • Strong year-on-year (y/y) growth in both debit card (+12.0%) and credit card (+9.2%) spending.  Even though credit card spending growth continues to trail debit cards, growth rates have recovered in recent quarters, following significant declines in 2009.  This reflects the efforts of leading credit card issuers to promote spending, as outstandings continue to decline.
  • Strongest credit card volume performance came from American Express, which enjoyed double-digit growth in all customer segments (13% in consumer, 14% in small business, and 18% in corporate).  Its share of total credit card spend rose from 24.6% in 1Q10 to 25.9% in 1Q11
  • Discover reported 24% debit card growth through its Pulse PIN debit network.  Visa also reported double-digit debit volume growth.
  • Visa’s share of total (credit and debit) card spend among the four networks rose 46 bps y/y to 51.9% in 1Q11

Volumes for Leading Card Issuers Are Recovering

In their most recent quarterly financials, the leading U.S. credit card issuers continued to show improvement in spending volumes. Credit card volumes were significantly hit in 2009, as consumers pulled back on discretionary spending, and as credit card issuers retrenched and reduced account numbers.

The following chart shows that most leading issuers returned to year-on-year growth in credit card volume in 2010, and that the rate of growth has steadily improved.

The reasons for the recent improvement in card volume are:

  • Overall economic recovery, with corresponding growth in consumer spending
  • Issuers’ promotion of card spending as a source of revenue, in particular as outstandings growth has been largely absent

A number of card issuers recently predicted that card outstandings should grow in the second half of 2011, but we expect that issuers will continue to push card volume, and aim for a good balance between spending and lending.

Financial marketing spend continues to recover

Third-quarter financial data released by the large U.S. banks this week pointed to the continuation of a trend observed in the previous quarter: year-on-year growth in marketing spend. Marketing represents a leading indicator for banks, as it is one of the first expense categories to be hit at the start of a downturn. The corollary is that an increase in marketing spend is indicative of banks’ expectation that economic conditions are improving.

The following are changes in marketing spend for leading financial institutions between 3Q09 and 3Q10 (quarterly changes are not generally regarded as reliable, due to seasonal factors):

  • Huntington: +152%
  • Capital One: +140%
  • American Express: +68%
  • Discover: +68%
  • Chase: +48%
  • PNC: +40%
  • SunTrust: + 13%
  • Key: +11%
  • Wells Fargo: +6%
  • Bank of America: +6%
  • U.S. Bank: -21% (although note that U.S. Bank 3Q09 marketing spend was much higher than usual, due to the launch of a number of marketing initiatives)