Acquisition of Discover would grant Capital One ownership of one of the major payment-processing networks in the U.S. and globally with 305mn customers, positioning it in competition with Visa, MasterCard, and American Express.
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Capital OneOn February 19th, Capital One declared its intention to acquire Discover through an all-stock deal valued at $35.3 billion. Both entities are significant players in the credit card industry, with Capital One ranking as the ninth-largest bank in the United States. Although the merger might influence consumers in the future, it’s not expected to finalize until later in 2025, pending regulatory and shareholder approval. The proposed deal has already attracted attention from policymakers across party lines.
Acquisition of Discover would grant Capital One ownership of one of the major payment-processing networks in the U.S., positioning it in competition with Visa, MasterCard, and American Express. This shift in network usage, expected to commence in Q2 of 2025, could eventually affect Capital One cardholders, particularly those traveling internationally.
The merger may foster increased competition in payment processing, potentially benefiting consumers through enhanced credit card rewards. However, there’s also a concern that reduced competition among issuers could lead to higher fees and interest rates.
Additionally, the consolidation would expand physical access for customers of both companies. Discover clients would gain access to Capital One’s numerous branches and cafes, while ATM access would be broadened for all customers.
Capital One is one America’s biggest banks, and a key issuer of Visa and MasterCard credit cards in the US. Discover, with 305m global cardholders, is one of the largest card payment networks in the US, although it is behind those of Mastercard, Visa and American Express.
The takeover, Capital One has argued, would enable it to “build a payments network that can compete” with the market’s largest players. Some Wall Street analysts have questioned whether Visa or Mastercard would suffer much as a result of the deal.
The merger awaits approval and scrutiny from regulators and policymakers, and recently significant opposition:
- Urging the Federal Reserve and Department of Justice to intervene, a coalition of more than a dozen advocacy groups cautioned that combining two of the largest credit card companies in the US would damage competition and “further concentrate risk” in the financial system and said that the deal is “dangerous, illegal, and must be stopped”. Among signatories are American Economic Liberties Project, Public Citizen and Americans for Financial Reform.
- Senator Elisabeth Warren, published an opinion at WSJ today “Block Capital One’s Merger With Discover”
- JPMorgan pursuit Discover from mid-2021 and according to FT, such a deal would have “been more difficult to get through regulators than the tie-up Discover ultimately struck with Capital One last month, because JPMorgan is already the biggest US credit card lender by loans. The Capital One deal will relegate Jamie Dimon’s bank to second place.”
