Capital One, one of the largest credit card issuers in the U.S., announced on February 19, 2024, that it has agreed to acquire Discover, another major credit card issuer and the owner of a global payment network. The deal, valued at $35.3 billion, is expected to close by the end of 2024 or early 2025, pending regulatory approval.
The merger would create a payments giant that would serve over 100 million customers, with a combined credit card portfolio of $200 billion and a market share of 18%. It would also give Capital One access to Discover’s payment network, which has 70 million merchant acceptance points in more than 200 countries and territories.
But what does this mean for the cardholders of both companies? Here are some possible scenarios and implications of the deal:
- Rewards and benefits: Capital One and Discover both offer a variety of credit cards with different rewards and benefits, such as cash back, travel, balance transfer, student, and secured cards. Capital One said it will continue to use the current Discover branding on Discover credit cards, and that it will honor the existing terms and conditions of the cardholders. However, it is possible that Capital One may introduce new or enhanced rewards and benefits for some cards, especially those that use the Discover network, to compete with other payment networks and companies. For example, Capital One may offer more travel perks, such as airport lounge access, travel credits, or Global Entry/TSA PreCheck fee credits, for its premium cards, such as the Capital One Venture X Rewards Credit Card or the Discover it Miles card. Alternatively, Capital One may offer more cash back options, such as rotating categories, for its cash back cards, such as the Capital One Quicksilver Cash Rewards Credit Card or the Discover it Cash Back card.
- Card acceptance: Both Capital One and Discover cards are widely accepted in the U.S., but Discover may have limited international acceptance compared to Capital One, which uses Visa or Mastercard networks. The merger may improve the global acceptance of Discover cards, as Capital One may leverage its scale and influence to expand the Discover network to more merchants and regions. Capital One may also push some of its cards to the Discover network, to reduce the fees it pays to Visa or Mastercard, and to keep more of the profits from the transactions. This may benefit the cardholders, as Capital One may pass on some of the savings to them in the form of lower interest rates, fees, or higher rewards.
- Customer service: Both Capital One and Discover are known for their high-quality customer service, and have won awards and recognition for their customer satisfaction and loyalty. Capital One said it will maintain a significant presence in Chicago, where Discover is based, and that it will retain Discover’s employees and culture. However, the merger may also pose some challenges and disruptions for the customer service operations, as Capital One may need to integrate the systems, processes, and policies of both companies, and to train and align the staff and resources. This may affect the speed, efficiency, and consistency of the customer service, especially during the transition period. Cardholders may experience longer wait times, more errors, or less personalized service, until the merger is fully completed and stabilized.
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