ST. LOUIS – Capital One is buying Discover Financial Services in a $35 billion all-stock deal. The merger would create the largest U.S. credit card company by loan volume.
“Capital One is going to be a gigantic player in the marketplace now,” Jaime Cox, Harris Financial Group managing partner, said during an appearance on “Mornings with Maria” FOX Business. “A vertically integrated financial services company, you know, sitting right in the middle of J.P. Morgan and Amex. That’s a great place to be in the market.”
Capital One plans to keep the Discover brand on credit cards and the Discover payment network. Acquiring Discover will give Capital One access to a credit card network of 305 million cardholders, beefing up its base of more than 100 million customers.
“What you’re going to see here in this deal is now the sixth-largest bank by deposits in the world, the third-largest credit card company in terms of transaction fees,” Michael Lee, founder of Michael Lee Strategy, said in an appearance on “Mornings with Maria” on FOX Business. “So, this is a spectacular deal for Capital One to get their own payment processing network.
But government watchdog group Accountable.US believes the merger would be a raw deal for American consumers.
“We see this as a way in which consumers are again the losers in this corporate financial marketplace,” Liz Zelnick, director of Economic Security & Corporate Power with Accountable.US, said.
Zelnick points to a new report from the Consumer Financial Protection Bureau that found large banks charge higher credit card interest rates than small banks and credit unions.
“Capital One was one of those banks that they identified. The bottom line is their products will continue to get more expensive for consumers as they eat up the competition,” she said.
Zelnick says less competition for Capital One means less incentive to lower interest rates and minimize junk fees.
“We’ve seen from their earnings reports that we’ve been tracking over the years that they’ve been making a great deal of money on junk fees,” she said. “In 2023, they made $1.7 billion on junk fees alone.”
Accountable.US wants federal regulators to get involved.
“They should block this merger. We fully support federal regulators taking a look at this deal,” Zelnick said.
