Yahoo Finance 3 Ways Consumers May Benefit When Discover Merges With Capital One
Capital One Financial stirred up the payments industry when it announced it was acquiring Discover Financial Services for $35.3 billion last month. The deal will merge two of the country’s biggest lenders and credit card issuers, and may not only benefit both companies and their stakeholders, but potentially their customer bases as well.
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If the deal passes regulatory scrutiny — and depending on how Capital One utilizes Discover’s existing payment network — the new company will be able to compete with the three biggest credit card companies in the U.S.: American Express, Mastercard and Visa.
And Capital One will be able to build its global payments network and gain access to Discover’s credit card network of 305 million cardholders. Of course, Capital One is banking on American account holders to continue to use their credit cards and maintain their high-interest-earning balances.
“Our acquisition of Discover is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payments companies,” said chairman and CEO of Capital One, Richard Fairbank, in a statement.
But how about cardholders themselves? Once the purchase is approved, customers may be looking at a “flurry of new perks,” according to USA Today.
It’s not yet clear how the merger will benefit customers — or if will pass regulatory review and stiff opposition from members in Congress — but it the acquisition is found to be good for shareholders and consumers, here are three ways customers may benefit from the Capital One’s purchase of Discovery.
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3 Ways Customers May Benefit When Capital One Merges with Discovery
1. Does Competition Breed Benefits?
As Fairbank mentioned, Capital One will be in a better position to level the competitive playing field and contend with the Visa-Mastercard duopoly. Although less competition typically has negative consequences for customer, Capital One’s acquisition of Discover’s payment network may result in customers getting some love in the form of perks or rewards via their Cap One cards.
Additionally, the two largest payment processors, Visa and Mastercard, plus American Express and smaller lenders, may be forced to match reward bonus points, cash back and other loyalty program benefits if they see Capital One clients enjoying what’s on offer.
2. Premium Perks
As USA Today reported, by acquiring Discover’s “high-credit-quality customers,” Capital One will “need to compete on premium perks, and that’s going to be something that’ll benefit customers,” said Marbue Brown, founder of the Customer Obsession Advantage. “Perks offered are going to be elevated to a new level.”
Brown speculated that this new level will include things such as luxury airport lounges, better service and other perks. Those with high balances or credit may be offered privileged services like shopping discounts and travel portal, things Discover customers relish.
3. New Cards, New Rewards
With Capital One gaining its own payment network, it won’t need to be doling out money to others. This can potentially mean better or new reward programs for its existing customers and new transfers from Discover. Merging the two companies might give customer the best of both their worlds.
Speaking to The Ascent, Eric Cohen, CEO of Merchant Advocate, suggested that the Capital One/Discover consolidation may bring customers such perks as personalized loyalty discounts, brand- and retail-specific rewards and other creative incentive programs.
“Capital One currently offers some great programs, so it is likely that they will use this opportunity to bolster the perks offered on their credit cards and target new customers through these benefits,” Cohen said. “They could choose to mirror similar Visa and Mastercard offerings, or even strengthen the perks on Discover cards to push consumers to increase usage.”
Discover, started by Sears back in 1985, has been struggling with corporate governance issues as of late and saw its CEO, Roger Hochschild, step down in August 2023, per The New York Times. Capital One is one of the nation’s largest banks, holding $479 billion in assets.
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This article originally appeared on GOBankingRates.com: 3 Ways Consumers May Benefit When Discover Merges With Capital One
