Dive Brief:

• Amid its push for new accounts, card company Discover Financial Services spent $271 million on marketing and business development in the fourth quarter, a 70% YoY increase, the company shared during a Thursday earnings call.
• New accounts for the Riverwoods, Illinois-based company were up 23% year-over-year, and 13% over 2019. "The strong level of card acquisition contributed to our return to loan growth over the second half of last year," Discover CEO Roger Hochschild said during the call.
• The company had expected fourth quarter marketing spending to pick up from the third quarter, when it totaled $210 million. CFO John Greene said during the Q3 earnings call last year that the company expected Q4 marketing spending to be somewhere in the range of $220 million to $280 million.

Dive Insight:

In the face of competition from fintechs, buy now-pay later providers and card rivals, Discover launched a new campaign in the fourth quarter to push "marketing expense toward the top end of our previously guided range," Greene said during Thursday’s call with analysts. Fourth quarter spending in this area was up $112 million over the same period in 2020, when marketing expense totaled $159 million.

When asked about account growth, Hochschild said the company doesn’t disclose the number of new accounts.

Costs have gone up since the low levels seen during the COVID-19 pandemic, the company "kept marketing and a lot of others pulled back," the CEO said.

Looking ahead, "our expectation is the cost per account will be roughly where it was pre-pandemic," Hochschild said. 

When asked about the risks to growth targets given the competition, Hochschild said the company is confident in its 2022 growth forecast, and acknowledged "the card business is just always competitive." 

"We have been very clear for many, many years that ours is a lend-focused business, going after that prime revolver segment. We’ve tailored our products for that," he said. "Again, we feel very good about the return we’re getting on the dollars we spend in marketing."

Discover reported net income of $1.1 billion for the fourth quarter of 2021; for the same period in 2020, net income was $799 million. For the full year, Discover reported net income of $5.4 billion, compared to $1.1 billion in 2020. 

The company reported year-over-year loan growth of 4% for the quarter. Discover Network payments volume jumped 25% YoY, to $53.2 billion, according to the company's presentation. Compared to 2019, proprietary card spending increased 31%. 

Discover expects loan growth in the high single digits, based on recently acquired accounts and current expectations of sales trends, and a modest decline in the payment rate. 

"The primary drivers of year-over-year growth were continued strong sales volume and significant new account growth throughout 2021," Greene said. 

As for areas of strategic interest, Hochschild said the company is "always looking for new opportunities on the payments side of our business," like the partnership it's forged with buy now-pay later provider Sezzle, for example.