Discover Financial Services (NYSE:DFS) Q3 2017 Earnings Conference Call - Final Transcript

Oct 24, 2017 • 06:00 pm ET


Discover Financial Services (NYSE:DFS) Q3 2017 Earnings Conference Call - Final Transcript


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David Nelms

environment have created more opportunity to drive both sales and receivables growth without a significant increase in marketing and expenses. Over time, strong customer engagement drives lower voluntary attrition and enhanced growth. For Discover, attrition has remain consistently low among prime revolvers reflecting the loyalty of our customer base.

The foundation for our strong performance is our commitment to outstanding customer service and a unique and expanding feature set in our Discover card. In our advertising, we remind customers that we treat you like you treat you. Customers are loyal to us in part because we serve them well which includes providing the helping hand in response to unexpected events.

The Equifax data breach and the increased potential for personal identity theft it has created had been on the forefront of consumers' minds. The breach resulted in an increase in call volume from customers but highlighted that we have been on the right path and focusing on features and innovations that help consumers to monitor their credit.

In July, even before we became aware of the Equifax breach, we introduced a free alert service available to all Discover card members. Enrolled card members will receive an alert if we find their social security numbers on any of thousands of risky websites. We will also monitor their credit reports and notify them of any new account openings. This feature is the latest example of our ongoing investment to provide our card members with the simplicity and innovative features they expect from us.

The number of enrollments in this feature has already surpassed our goal for the full year, our new alert features is one element of our continued investment in technology. As a direct bank differentiation and technology is critically important for us. Our innovative features like Freeze It and our new alert service further differentiate Discover in a competitive marketplace.

The appeal of these features was recognized by JD Power last quarter, when our mobile app was ranked highest in customer satisfaction among all US credit card companies. We continue to invest in new digital and mobile capabilities that enhance customer experience as well as advanced analytics and machine learning technologies that will provide a sustainable credit and operating efficiency benefits.

Turning to credit for a moment. While credit costs have risen, our performance remains largely in line with our expectations and our card portfolio rate remains below the industry average. The prime consumer remains healthy, buoyed by a robust labor market, rising home prices and manageable debt service levels. The Federal Reserve recently released its survey of consumer finances which showed medium debt to income and payment to income ratios at their lowest levels since the early 2000s.

Moreover, the share of heavily indebted consumers those whose payment to income ratios above 40% fell to its lowest level since 2001. I would add that in October, consumer sentiment reached its highest level in well over a decade. The US consumer continues to feel positive about future prospects for their