The news: American Express’s and Discover’s Q1 performances outlined similar trends despite catering to different core demographics.
American Express’s numbers: Total network volume grew 16% year over year (YoY) to reach $399 billion, down from 32% YoY growth the year prior, per its earnings report.
- Goods and services (G&S) growth was moderate at 9% YoY, but the real jump came from travel and entertainment (T&E), which was up 39% YoY.
- This reflects both the post-pandemic travel rebound and soaring airline prices: Airline spending was up 60% YoYand flight ticket prices jumped 28.5% over the course of 2022, per the US Bureau of Labor Statistics.
- Restaurant spending also grew 28% YoY for the quarter. Amex CEO Stephen Squeri said consumers booked a record number of reservations on Amex’s restaurant platform, Resyin March.
- Amex noted it’s on track for its revenue growth goal of between 15% and 17% for the full-year 2023.
Discover’s numbers: Discover’s total network volume grew a modest 9% YoY to hit $50.558 million, flat compared to Q1 2022per its earnings report.
- Diners Club’s card volume surged 28% YoY, reflecting an improvement in both global T&E and corporate spending.
- Discover benefitted from the same T&E growth that juiced Amex’s volume, along with inflation-bumped prices.
- But network partner volume dropped 1% YoY, bringing down overall growth.
- Revenues net of interest expense were $3.8 billion, up 29% YoY, due to higher net interest income and prior losses on equity investments.
The bottom line: While card spending growth continues, networks must prepare for economic headwinds.
Given inflation, record-fast interest rate hikes, and shaky economic conditions, issuers like American Express and Discover may need to consider tightening lending standards and adjusting expenses to protect theirrevenues. For example, Amex eliminated one of its biggest travel perks in January to tighten rewards expenses.