Discover Details Key 2013 Initiatives

Discover Financial Services held its annual financial meeting in New York yesterday, with many of the company’s leading executives reflecting on Discover’s 2012 results and looking forward for the remainder of 2013. 

Much of Discover’s investor relations call focused on six core “strategic initiatives” that Roger Hochschild, President and COO, outlined during his presentation: the recently launched Discover It card; a build out of Discover’s mortgage platform and launch of a home equity product; a new banking platform based on flexibility and lower operating cost; partnerships with PayPal and other payments players; an expansion of Discover’s PULSE platform; and the launch of their cashback checking product.

“We have a relatively straightforward set of priorities, and the entire company is relentlessly focused on executing against these priorities,” Hochschild said.

What are some of the other key takeaways from each of the presenters on Discover’s call? PYMNTS.com takes a look.

David Nelms, Chairman and CEO, on Discover’s core strategy

“Consumer preference has moved away from branch banking, and we support all the preferred banking channels, except the one that is shrinking the most. In fact, today, you can do pretty much everything you would do in a branch either online, on the phone or at an ATM. And you can bank more conveniently 24 hours a day with Discover.”

James Panzarino, chief credit risk officer and EVP, on personal and student loans

“We shared our credit performance across all our products, which continues to be better than our peer group. This is a direct result of our investment in data, analytics and our unique organization structure, which should continue to produce industry-leading performance. Our performance hasn’t come at the expense of growth, there’s a very tight partnership between risk and marketing, and we’ve increased our receivables by $9 billion across all products in the past two years.”

Harit Talwar, EVP and President of US Cards, on Discover’s cashback program

“Cash rewards is not a commodity. It is an experience. It is core to our brand, and I do believe we are the best. Our competitors are spending a lot of money, frankly, imitating our programs, but we remain the largest cash rewards program in the country. It is a simple, powerful, relevant program, rewards on all purchases with special earning and redeeming choices.”

Carlos Minetti, President of consumer banking & operations and EVP, on home equity loans

“Approximately 80 percent of Discover customers are homeowners, and a sizable number of them could benefit from a home equity product. To ensure success, we will draw on the strengths of both our personal loans and home loans businesses. At launch, we will offer closed-end, fixed-rate product, positioned to help consumers who are looking to leverage their home equity to achieve their financial goals. We expect it to be used mostly for debt consolidation with loan amounts between $25,000 and $100,000.”

Diane Offereins, president of payment services and EVP, on PULSE

“We are implementing PULSE PAY Express, which is a PINless point-of-sale transaction under $50. We will introduce the product with select retailers with a low fraud risk profile, places like grocery, discounts and quick service restaurants. This will expand the pool of non-PIN transactions that can be routed to PULSE. These transactions might otherwise be routed to signature-only products.

R. Mark Graf, CFO and EVP, on earnings per share

“Payments is tracking below our volume growth target for the first quarter due to some competitor strategies impacting PULSE. But we believe that some of the initiatives Diane discussed, including new network partnerships and competing for not just PIN-based debit, but all debit transactions will drive volume growth above our 10 percent target longer term. Finally, our ROE target remains intact at 15 percent plus, and it’s our current expectation that we’ll be able to deliver returns at or above this level.”

To read the full transcript from the Discover call, click here