Capital One says merger with Discover will benefit merchants, consumers

In one of the biggest financial industry mergers in recent memory, Capital One on Monday announced plans to purchase Discover Financial Services for $35.3 billion—and it’s touting the deal as a potential boon for consumers, small businesses, and merchants.

“It will accelerate the company's long-standing journey to work directly with merchants to leverage its customer base, technology, and data ecosystem to drive more sales for the merchant and great deals for consumers and small businesses,” the bank said in a statement.

Discover would bring its global payment network of 70 million merchant acceptance points across 200+ countries and territories. Capital One, meanwhile, had $348.4 billion in deposits and $478.5 billion in total assets at the end of 2023.

“This is a very big deal,” Chris Uriarte, a payments expert and partner at consulting firm Glenbrook Partners, told Retail Brew. “From a credit/debit cards perspective, Capital One can now create a more ‘closed loop’ environment, similar to how American Express operates.”

American Express has boasted that its “closed loop network”—in which there’s no third party bank mediating the relationship between merchants and customers—allows it to share insights with businesses on their customers’ spending habits.

“In the Visa/Mastercard model, card issuers are often far removed from the merchant, but Capital One will look to build stronger merchant relationships through potential economic incentives, better fraud detection, and other value-added services,” Uriarte said.

“Of course, the question of whether the deal can pass regulatory scrutiny is top of mind for many,” he added.

He expects Capital One to stress that this merger will make the partners more competitive with Mastercard and Visa, which are significantly bigger players than Discover, but it remains to be seen if lawmakers such as Senate Majority Whip Dick Durbin (D-IL) will buy that narrative.

Just last week, Durbin introduced a bill designed to “enhance competition” in a credit card marketplace “currently dominated by the Visa-Mastercard duopoly.”

“Visa and Mastercard are pushing back hard against our efforts to bring competition to the market, because they would rather cushion their bottom lines than provide relief to families and small businesses,” he said in a statement.