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73
Other Income
The following table presents the components of other income for the periods presented (dollars in thousands):
Discount and interchange revenue(2)
Fee products
Loan fee income
Transaction processing revenue
Merchant fees
(Loss) gain on investments
Other income
Total other income
For the Years Ended November 30,
2011
$ 1,083,847
428,193
338,147
179,989
16,184
(3,622)
162,436
$ 2,205,174
2010
$ 1,055,359
412,497
339,797
149,946
28,461
19,131
89,808
$ 2,094,999
2009
(Non-GAAP
As-Adjusted1)
$ 984,088
403,246
494,305
125,201
44,248
(3,826)
138,802
$ 2,186,064
2011 vs. 2010
increase
(decrease)
$
$ 28,488
15,696
(1,650)
30,043
(12,277)
(22,753)
72,628
$ 110,175
%
3%
4%
—%
20 %
(43)%
(119)%
81 %
5%
2010 vs. 2009
increase
(decrease)
$
$ 71,271
9,251
(154,508)
24,745
(15,787)
22,957
(48,994)
$ (91,065)
%
7%
2%
(31)%
20 %
(36)%
NM
(35)%
(4)%
(1) See “ - Reconciliations of GAAP to Non-GAAP As-Adjusted Data.”
(2) Net of rewards, including Cashback Bonus rewards, of $879 million, $738 million and $670 million for the years ended November 30, 2011, 2010 and
2009 respectively.
Total other income increased for the year ended November 30, 2011 as compared to the year ended November 30, 2010
due to increases in discount and interchange revenue, fee product revenue, transaction processing revenue and other income,
partially offset by lower merchant fees and a decrease in gain on investments. These key drivers as well as other factors are
discussed in more detail below.
Total other income decreased in the year ended November 30, 2010 compared to the year ended November 30, 2009 on
a non-GAAP as-adjusted basis as lower loan fees and other income were partially offset by higher revenues from discount and
interchange, transaction processing revenue and a $19.6 million gain relating to the liquidation of collateral supporting the
asset-backed commercial paper notes of Golden Key. These key drivers as well as other factors are discussed in more detail
below.
Discount and Interchange Revenue
Discount and interchange revenue includes discount revenue and acquirer interchange net of interchange paid to third-
party issuers. We earn discount revenue from fees charged to merchants with whom we have entered into card acceptance
agreements for processing credit card purchase transactions. We earn acquirer interchange revenue from merchant acquirers on
all Discover Network card transactions and certain Diners Club transactions made by credit card customers at merchants with
whom merchant acquirers have entered into card acceptance agreements for processing credit card purchase transactions. We
incur an interchange cost to card issuing entities that have entered into contractual arrangements to issue cards on the Discover
Network and on certain transactions on the Diners Club network. This cost is contractually established and is based on the card
issuing organization's transaction volume and is reported as a reduction to discount and interchange revenue. We offer our
customers various reward programs, including the Cashback Bonus reward program, pursuant to which we pay certain
customers a percentage of their purchase amounts based on the type and volume of the customer's purchases. Reward costs are
recorded as a reduction to discount and interchange revenue.
Sales volume increased during the years ended November 30, 2011 and 2010, driving an increase in discount and
interchange revenue that was partially offset by a higher level of rewards. In total, our gross discount and interchange revenue
increased by $170 million for the year ended November 30, 2011 as compared to the year ended November 30, 2010, which
was partially offset by a $141 million increase in Cashback Bonus rewards earned by our customers. For the year ended
November 30, 2010 as compared to the year ended November 30, 2009 on a non-GAAP as-adjusted basis, our gross discount
and interchange revenue increased by $140 million, which was partially offset by a $68 million increase in Cashback Bonus
rewards earned by our customers.
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