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Capital One’s proposed acquisition of Discover Financial Services will have a significant impact on the credit-card industry. If Capital One transitions even some of its current Visa and Mastercard customers to Discover, it could?lead to a realignment that will affect the competition among card networks, lead to higher fees for merchants, and introduce new benefits for consumers. An economist with expertise in the credit-card industry explains the implications if the deal goes through.

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A few quick thoughts about Capital One's potential acquisition of Discover Financial Services that we at Glenbrook Partners want to point out as part of our monthly Payments Post (authored by Justin Pituch, with contributions by myself and others at the firm): ?? On the issuing side, the newly combined entity will become the largest credit card lender in the US, with balances 20% greater than JPMorgan Chase & Co. (JPMC will still lead in credit volume) ?? Combined with Discover's debit product, the new Capital One will become one of the largest deposit institutions in the US, only behind the big three retail banks: Bank of America, Chase, and Wells Fargo. Capital One will also become the largest debit card issuer in the US. ?? With its ownership of the Durbin-exempt Discover Network, Capital One will aim to convert its entire debit portfolio to Discover starting in Q2 2025. We would now have a behemoth of an issuer converting from Durbin-regulated interchange to unregulated interchange rates. (Expect the regulators to focus heavily on the implications of this) ?? While this may translate to higher interchange for merchants on debit cards, merchants may see more competition with credit card interchange rates as Capital One will also move a significant chunk of their credit cards to the Discover network, away from Visa and Mastercard. ?? Lots more Samuel L. Jackson: The combined entity will have a market budget that rivals American Express's ad spend. (Are you tired of hearing "What's in your wallet?") ?? Regulators: Is this better for competition against Visa and Mastercard, or is it too big of an industry consolidation? That's the million-dollar question. (billion-dollar? trillion-dollar?) Check out the post here for more color: https://lnkd.in/eMqR25Cx #payments #cards #fintech #discover #capitalone

The potential Capital One+ Discover Financial Services merger could be more than a reshuffling of the top credit card issuers. It could blend capabilities in unprecedented ways, combining a major card network, # 4 issuer, merchant services, and a bank charter under one roof. This entity might transform the four-party model and forge new paths in consumer banking. The innovation potential is vast, limited only by leadership's imagination and regulatory receptivity. The birth of a new paradigm is upon us! Exciting times ahead! Grab your popcorn and join us at Datos Insights for the show. hashtag #financialservices #fintech #banking #creditcards #payments

And as the world of digital commerce evolves, subscription-based services are one of the keys to enriching consumer experience. At the same time, there is a need to ensure businesses have the transparency they need to optimize the growth in demand, while reducing involuntary subscription 'churn'. So we are taking steps on this path, today announcing our intention to acquire Minna Technologies. It will allow Mastercard to create a product to meet the needs of all parties. By evolving our solutions, we are providing the means for businesses and consumers to engage in this digital relationship, as well as the opportunity to keep consumer choice central in the subscription economy. #subscriptions #ecommerce More here: https://lnkd.in/gHb4p8dj

The recent?Visa?and?Mastercard?earnings spotlight the healthy growth in consumer spending and cross-border volumes as client incentives continue to outpace net revenue on a dollar basis. Flagship Advisory Partners analyzes the card schemes' key performance indicators and other metrics. #cardschemes?#visa?#mastercard?#crossborder?#payments?#fintech

Several weeks back I mentioned the diamond in the Capital One/Discover Financial Services acquistion was control of the #debit #network PULSE, a Discover company. Allowing the bank to "double dip" by taking #interchange on their own branded Discover #debitcards and making it also on the #pointofsale #merchant side is a power move and under current #regulations, not in jeopardy of breaking any rules. According to this commentary in Digital Transactions, Eric Grover of Intrepid Ventures states exactly that: "When Capital One’s debit-card portfolio is converted from Mastercard to the Discover network, it will benefit from higher market interchange and will not have to offer merchants one of its network competitors. Operating as a three-party debit network routing transactions to itself as an issuer, Capital One will be exempt from the Durbin Amendment. Assuming all its debit transactions are Discover (some will be Pulse), its debit-interchange revenue will increase roughly 300% for a $50 payment." #consumerspending #paymentprocessing #cardissuing #banking #merchantservices #acquisitions #creditcards #financialinstitutions

The recent?Visa?and?Mastercard?earnings spotlight the healthy growth in consumer spending and cross-border volumes as client incentives continue to outpace net revenue on a dollar basis. We analyze the card schemes' key performance indicators and other metrics here:?https://lnkd.in/exNMtBeQ #payments #cardschemes #visa #mastercard #fintech #crossborder #xborder

Global commercial card spending has hit a new milestone, reaching $3.7 trillion in 2022. According to recent data, total commercial card purchase volume grew 17% globally, with the US accounting for 59% of the volume. The fastest rebound was seen in T&E spending, surpassing pre-pandemic levels for the first time in 2022 as business travel resumed. SMB also saw robust growth driven by credit card spending in the Americas. Visa maintained the largest share (39%) of global commercial card volume, while Mastercard (28%) and American Express (17%) gained share as T&E recovered. Interestingly, fintech issuers are playing an increasing role, especially for SMB credit cards, and virtual card adoption is also rising for B2B payments. Growth is forecast to continue at a 10% CAGR globally through 2028, led by T&E (12%) and Asia-Pacific (13%). Factors like supplier acceptance, attractive rewards programs, and government e-payment initiatives will support ongoing expansion. #b2bpayments #mastercard #visa #amex #commercialcards

Capital One and Discover are set to be a powerful force, improving payments efficiencies and credit card product #enhancements. In a recent article in @DTPaymentNews, Beth Robertson shares her insights on the potential deal. Read the full article here: https://loom.ly/fFEsGhY #payments #creditcard #M&A