What the Discover-Capital One Merger Means for Their Customers

Capital One has acquired Discover Financial, becoming the sixth-largest bank in the US by asset size.

In an earnings call last month, Capital One’s CEO, Richard Fairbank, said the goal is to “preserve the best” of what Discover does, such as its advertising and focus on customer experiences.

Capital One’s $35.3 billion acquisition of Discover was first announced in February 2024.

The deal was approved by regulators last month, despite pushback from top Democrats and consumer advocates who raised concerns about lower competition and risks to low-income customers and those with poor credit scores.

Representatives of Capital One and Discover did not respond to a request for comment from Business Insider. On Monday, both banks said that “customer accounts and banking relationships remain unchanged” at this time.

Here’s what customers of each of the two companies stand to gain and lose from the deal.

What does the merger mean for Capital One customers?

A much bigger Capital One could mean more products, but some Democrats have warned of higher fees.

Capital One previously said the merger would increase competition with transaction giants Visa, Mastercard, and American Express and improve access for lower-income customers.

In a white paper published in July, four economists and lawyers at the International Center for Law & Economics wrote that the merger may finally end the Visa and MasterCard “duopoly.”

They added that the merger would let Capital One switch its debit cards to Discover’s payment networks, and it may offer “more attractive products to depositors.” This could include free checking accounts with no minimum balance rules and debit cards with cash back for lower-income customers.

Cost savings and other benefits from the acquisition could also make Capital One a stronger competitor to “behemoths such as JPMorgan Chase, Citibank, and Bank of America,” the ICLE group wrote.

What does the merger mean for Discover customers?

The merger doesn’t appear to mean any big immediate changes. Discover said accounts aren’t linked to the new corporate owner, so Capital One branches and customer service can’t help with Discover products.

Eventually, Discover customers may have greater access to the bank through Capital One’s branches and ATMs. Right now, Discover has just one physical outpost in Delaware.

Michael Shepherd, the interim CEO of Discover, said on an earnings call last month that the deal would “increase competition in payment networks” and “offer a wider range of products.”

Reactions to the deal

In a letter written to the Federal Reserve System earlier this month, Rep. Maxine Waters of California and Sen. Elizabeth Warren of Massachusetts argued that the merger would hurt Capital One customers.

Warren and Waters are top Democrats on the Senate Banking, Housing, and Urban Affairs Committee and the House Financial Services Committee, respectively.

“These are not two traditional banks — they are credit card giants,” they wrote.

Waters and Warren said that post-merger Capital One would have 40% of the general-purpose credit card issuance market share. This would give Capital One the power to increase fees for merchants and reduce rewards and other benefits for customers.

“Merchants would have no choice but to accept the terms dictated by Capital One’s network, since they need to access the customers of the largest credit card issuer in the country,” they wrote in the letter.

Warren and Waters said it was “doubtful” that Capital One could fix the “myriad issues” Discover faces.

“For roughly 17 years, Discover misclassified millions of consumer credit cards as commercial, resulting in higher interchange fees for transactions,” the politicians wrote.

In the white paper, the ICLE economists and lawyers wrote that a merger could improve data protection because the combined company would have the capacity to increase “financial investments in security.”

A bigger company also means access to more data, which can be a plus, they wrote.

“The ability to capture and analyze more data on more customers may also permit the larger and more competitive company to develop and offer new innovative products,” the ICLE experts wrote.