Segment Disclosures

3 Months Ended

Mar. 31, 2020

The Company's business activities are managed in two segments: Direct Banking and Payment Services.

•

Direct Banking: The Direct Banking segment includes Discover-branded credit cards issued to individuals on the Discover Network and other consumer products and services, including private student loans, personal loans, home equity loans, and other consumer lending and deposit products. The majority of Direct Banking revenues relate to interest income earned on the segment's loan products. Additionally, the Company's credit card products generate substantially all revenues related to discount and interchange, protection products and loan fee income.

•

Payment Services: The Payment Services segment includes PULSE, an automated teller machine, debit and electronic funds transfer network; Diners Club, a global payments network; and the Company's Network Partners business, which provides payment transaction processing and settlement services on the Discover Network. The majority of Payment Services revenues relate to transaction processing revenue from PULSE and royalty and licensee revenue from Diners Club.

The business segment reporting provided to and used by the Company's chief operating decision maker is prepared using the following principles and allocation conventions:


•	The Company aggregates operating segments when determining reportable segments.


•	Corporate overhead is not allocated between segments; all corporate overhead is included in the Direct Banking segment.


•	Through its operation of the Discover Network, the Direct Banking segment incurs fixed marketing, servicing and infrastructure costs that are not specifically allocated among the segments, with the exception of an allocation of direct and incremental costs driven by the Company's Payment Services segment.


•	The assets of the Company are not allocated among the operating segments in the information reviewed by the Company's chief operating decision maker.


•	The revenues of each segment are derived from external sources. The segments do not earn revenue from intercompany sources.


•	Income taxes are not specifically allocated between the operating segments in the information reviewed by the Company's chief operating decision maker.

The following table presents segment data (dollars in millions):

	Direct Banking			Payment Services		Total
For the Three Months Ended March 31, 2020
Interest income
Credit card loans	$	2,416		$	—	$	2,416
Private student loans	205			—		205
Personal loans	254			—		254
Other	107			—		107
Total interest income	2,982			—		2,982
Interest expense	584			—		584
Net interest income	2,398			—		2,398
Provision for credit losses	1,807			—		1,807
Other income	366			124		490
Other expense	1,118			41		1,159
(Loss) income before income taxes	$	(161	)	$	83	$	(78	)

For the Three Months Ended March 31, 2019
Interest income
Credit card loans	$	2,362		$	—	$	2,362
Private student loans	205			—		205
Personal loans	237			—		237
Other	133			—		133
Total interest income	2,937			—		2,937
Interest expense	632			—		632
Net interest income	2,305			—		2,305
Provision for credit losses⁽¹⁾	809			—		809
Other income	372			86		458
Other expense	989			35		1,024
Income before income taxes	$	879		$	51	$	930

(1)

Prior to adoption of ASU No. 2016-13 on January 1, 2020, credit losses were estimated using the incurred loss approach.