Although its third quarter net income dropped 7% year-over-year, Discover Financial Services remains confident in the opportunities it has invested in for the future.

Factors such as the economic environment in Europe, the impact of currency exchange rates and the dynamic debit market “keep the near-term outlook for payment services muted,” says David Nelms, chairman and CEO of Discover, during an Oct. 21 conference call to discuss third-quarter earnings. “But we remain optimistic about the segment's long-term potential.”

Payment services pretax income decreased by $20 million from last year, to $28 million. The segment's revenue decreased by $10 million due to lower Pulse transactions and a reduction in pricing, and expenses within payment services were up $10 million because of rising operating costs with Diners Club. Year-over-year Pulse transaction volume declined by 2%, and payment service dollar volume also dropped 2%, to $48.5 billion. Discover's net income was down fell to $593 million, from $637 million a year earlier, although credit card loans were up and credit card net charge-offs were down. Credit card loans grew 4%, or $1.9 billion, to $50.4 billion and credit card net charge-offs were at historic lows with rates of 2.05%.

Discover spotlighted ongoing partnerships, such as its pact with PayPal to allow consumers to use PayPal at all Discover accepting terminals and its deal with Ariba Network to private-label its processing network to create AribaPay. It also mentioned Facebook and Amazon as partners working on new services.

“I’m pleased with the progress were making," Nelms said. “We’re building a portfolio of partnerships, not counting on just one."

Discover is focusing on building volume before building profits through these new partnerships, he said. Many of these partnerships “won’t really that meaningful even through next year as far as profits go.” 

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