Discover Financial Services’ CFO Mark Graf recently expressed interest in the private label credit card business.
Graf, speaking at a Deutsche Bank conference in New York, said Discover likes the private-label business, in which lenders issue credit cards on behalf of retailers and other partners, and would “like to find an entree” in to the business.
There were “bits and pieces” of HSBC’s U.S. card business that were “intriguing” to Discover, Graf said in response to an audience member’s question, according to a webcast. He did not say whether Discover formally bid on the business, which was ultimately acquired by Capital One Financial Corp. (COF) in a deal completed earlier this month.
Private label cards are a sector of the credit card market that seems to be alternately in and out of favor with issuers. While generally higher risk portfolios, they can have higher returns and represent an alternative growth channel for issuers. Merchants favor these programs as they enable customers to make incremental sales, and can serve as the basis of customer loyally and rewards programs. With the improving economy and better risk controls in place, issuers are again evaluating the merits of this card segment.
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