Sumary of Discover spends millions on ads, loosens credit in bid to spur lending:
- Consumers are unlikely to change gears quickly, but Hochschild expects that by this fall some may begin turning to loans again as stimulus payments and unemployment benefits begin to wind down.
- “The strong loan repayment rate we’re seeing links back to savings that households built up as well as their overall liquidity from government support, but as that support gets withdrawn we expect to see modest loan growth during the back half of this year,” Hochschild said in an interview Thursday.
- Still, card receivables were down 2% year over year as payment rates hit a record high.
- “I think as people catch up on trips and attend events that were delayed we’re going to see this travel spending remain strong for a while, and obviously we’re not going to see retail sales continue at a 30% growth forever,” he said in the interview.
- Business travel has not bounced back in the same way, and international travel through Discover’s Diners Club International payment card arm targeting corporate travelers is still well below 2019 levels, Hochschild said.
- So far the installment lending phenomenon powering growth for buy now/pay later firms like Klarna, Affirm and Afterpay isn’t directly affecting Discover’s slow loan growth, Hochschild said, but the company is keeping close watch on that category.
- Earlier this month Discover sank $30 million into the Minneapolis-based BNPL firm Sezzle after establishing a partnership earlier this year.
- Discover plans to eventually add Sezzle as an option to consumers and expand connections to the more than 34,000 merchants Sezzle has integrated with.