Discover's new CEO says Amazon is a friend to banks, not a foe
As Wall Street keeps a wary eye on Amazon.com Inc.’s possible foray into finance, Discover Financial Services’ new chief executive officer isn’t too worried about technology-based invaders.
Roger Hochschild, 54, takes over the top job on Monday after more than a decade as president and chief operating officer of the country’s sixth-largest credit-card issuer. He said companies like Amazon, the retailing giant seen as poised to use its online platform as a springboard into financial services, and Alphabet Inc.’s Google aren’t likely threats.
“I view them as partners with leading-edge capabilities that we need,” Hochschild said in a telephone interview. “Very few tech companies want to become a bank and are keenly aware of some of the challenges and regulation that come with it. So I think the risk of some of these tech players getting into banking is a bit overstated.”
Hochschild succeeds David Nelms, who’s stepping down as CEO after almost 15 years. The change comes amid increased interest in the credit-card market from competitors including Wells Fargo & Co. and Goldman Sachs Group Inc. And U.S. tech companies are looking to disrupt the financial world by facilitating payments or offering loans to small businesses.
Riverwoods, Illinois-based Discover counts Amazon and Google as partners, Hochschild said, adding that many financial firms rely on those companies as technology providers. Discover uses Amazon’s cloud computing services and relies on Google’s speech analytics technology to improve its call centers, he said.
Part of his focus will be on continuing to win deals with companies pushing emerging forms of payments, after Discover landed partnerships with firms like Apple Inc. and PayPal Holdings Inc.
“Financial institutions that fall behind in terms of driving business value from the new technologies will wake up three years from now fundamentally noncompetitive,” Hochschild said in the interview.
Joining Discover in 1998 as chief marketing officer, Hochschild was named president and COO in 2004. He has three children with his wife, Stephanie, who took over as owner of an independent bookstore in a Chicago suburb in 2013.
Hochschild helped Nelms lead the company through its 2007 spinoff from Morgan Stanley. Since its debut, Discover’s stock has returned 214 percent, compared with the 15 percent gain of the 67-company S&P 500 Financials Index.
Discover has boosted credit-card lending to new and existing customers in recent quarters. At the same time, it’s been among lenders setting aside more money to cover souring loans as outstanding credit-card debt reached a record in the U.S.
Hochschild said Discover is already focused on building the credit and collections capabilities it will need in the event of a downturn.
“It’s very hard to cut back too hard in anticipation of a cycle turning,” he said, noting that if the bank did that several years ago it would have “missed out on a lot of great opportunities.” Still, “at some point, we’ll be in a worse credit environment.”