We wish to thank John Cabell, managing director of payments intelligence at J.D. Power, for the following insights sent in response to news of Capital One and Discover's plans to combine forces and become a new payments industry powerhouse: "Can Capital One and Discover create a team formidable enough to seize the lead among top credit card issuers?," Cabell wrote. "If they can combine their best attributes, they may have a chance. "On their own, both companies currently trail the top performers. Capital One lags behind JPMorgan and American Express in purchase volumes, while Discover is in a distant fourth when it comes to total network volume. Both brands currently trail American Express in issuer customer satisfaction.
"As a combined entity, though, the two could be much stronger. The merging of Discover’s customer-focused culture and Capital One’s card product domination could be unprecedented. According to J.D. Power data, Discover card customers tend to be more loyal than those of Capital One, with 49% of holders having their cards for more than five years compared to 25% for Capital One. By contrast, with more new customers, Capital One earned J.D. Power awards for highest satisfaction in two card products in 2023. What’s more, Discover customers have been less likely than Capital One customers to have multiple products with the same issuer, in particular deposit accounts, and more likely to have strong credit scores, a fact which may only add to the financial opportunity and momentum within the combined companies.
"Meanwhile, as a major player in small business credit cards, Capital One could fill a role that Discover had abandoned. Within recent years Discover stopped issuing new small business cards, and the new corporation could relaunch or introduce new small business products to gain more customer volume.
"The combined company can also expand the reach of the Discover card network. As potentially the largest issuer in the U.S. post-merger, it could put more pressure on competitors to compete on transaction pricing and newly available payment types with merchants. If that leads to the new Capital One/Discover network being used at more retailers with more card and non-card payment types, it should improve its market share, as J.D. Power data show customers are more likely to add a card or use a payment type that is accepted everywhere. That is a current pain point for Discover customers, as they report their cards being less likely to be accepted everywhere and less likely to cite acceptance as the reason for opening a card, compared to Visa or Mastercard.
"A new, more robust competitor in the payments space could be a potent force for change. How consumers and other industry players react remains to be seen. The months ahead will certainly be exciting as a new future emerges."
What do you believe the impact of a Capital One-Discover merger will be on the industry overall and on your business in particular? Share your thoughts on this question or on other issues of concern to the industry at greensheet@greensheet.com. 
The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.
Prev Next
