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Key US regulators approve merger of Capital One and Discover, paving the way for a new biggest credit card company
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- Title
- The Capital One merger with Discover just cleared a major hurdle | CNN Business
- Authors
- Elisabeth Buchwald
- Published
- Apr 18 2025
This has been discussed a bit before, but I don't think most people understand why this could benefit consumers and even people that don't use credit cards.
Currently, Visa and MasterCard control 90% of payment processing (ignoring China) which gives them insane influence and leverage over every market. Many types of adult media and video games have had defacto bans because Visa made a rule change. Merchants have to increase prices for everyone to cover the soaring interchange fees that Visa and MasterCard charge.
If Capital One moves all their cards to Discover for payment processing, they'll be increasing the amount of competition in the space, and it's likely to drive down interchange fees. Since they'd be the largest credit card company, they could shift the payment processor industry from a duopoly into a more fair and competitive space.
I’d also note that CapitalOne and Visa/MC were separate categories entirely. CapitalOne was an issuing bank - they would be equivalent to Chase or BoA. Visa/MC are CC rails. Discover is both rails and an issuing bank (and so is Amex).
That’s likely why the merger was approved to begin with. It’s mostly vertical, since discover is mostly a rails and CapitalOne is just an issuing bank.
Now CapitalOne will enter the Amex category of owning rails and the issuing bank.
Realistically, the reduction of discover as an issuing bank doesn’t meaningfully reduce competition in the issuing bank space, since they’re just so insignificant market cap wise. But adding capital one may allow the merged unit to actually compete with visa/mc/amex in the rails business.
Considering some of Capitol One's major credit cards are travel focused, I imagine that's something they'll push for.
Amex is the same, although when I was in Europe a few weeks ago I saw a lot of billboards and such for Amex, so maybe they're trying to expand, at least in the markets I was in.
Interestingly amex was the only US card brand that SNCF (French train operator) accepted for a seat reservation when I was traveling in 2023.
My sister had the same experience traveling in Europe. I can’t remember which company or country, but she had to call me for my Amex card numbers. Very weird experience.
Interesting, I booked a train ticket through SNCF, I don't recall which card I used though. I will say, all my hotels (independent or European brands) took Amex. It was smaller businesses that mostly didn't.
Amex is in kinda a weird place within Europe afaik. Discover, by contrast, I've never seen a place in Europe accept. I had trouble using my Discover card when I visited Montreal.
Could someone explain how this merger could create the largest credit card company if Visa and Mastercard have 90% of the market?
I have no idea but I have a theory. Capital one is a bank that issues credit cards. Master card is a payment processor, not a bank. You can’t have a master card credit card, you can have a chase credit card that uses master card for payment processing. There are relatively few banks that manage their own payment processor. Most prolific is probably American Express. Amex is the payment processor and the bank. Visa and master card are not banks. Discover is like Amex, where they are a bank and a payment processor. Maybe with capital one being on Discover would make it the largest bank+processor?
Yep, this is correct. Visa and MasterCard control the payment processor market. Capitol One merging with Discover would make them a huge credit card company, but they'd still be swimming upstream as a payment processor.
American Express has similar issues, but they had some first-mover advantage and a unique proposition as the wealthy American credit card (they are also extremely greedy as a payment processor which is part of why AMEX is less commonly accepted).
Thank you, this nuance is incredibly valuable. It seems this might be one of the few situations where allowing a mega-merger is likely better for the market and the consumer.
Used the page title instead of the headline, since it was more descriptive. Feel free to change if necesary.
Anyway, there was discussion of this merger here about year ago. Looks like it's finally happening with Fed and OCC approval.
:( Crap. I don't have issues with my discover stuff but I haven't heard the same about capone.
I'm a customer of both -- Capital One way longer than Discover, like 20yrs vs 10yrs -- and haven't had issues with either.
Still, I can't imagine a merger will pay off for customers.
Not sure which issues you're talking about, but I haven't had any with Capital One over the last eight years.
Same. I initially went with discover over capone because I read about how much better discover was. Fun. that's 10 years of having a CC I love gone to waste.
Is it? You had 10 years of having a CC you loved. Whatever happens now, you had that.
That's true, I just don't want to have to deal with a new company that I expressly chose not to go with.