Fintech Nexus Newsletter (February 20, 2024): This Is A Big Deal: Capital One Is Acquiring Discover

Republished By Plato

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Many people have called Capital One the original fintech.

Founded in 1994 by Richard Fairbanks and Nigel Morris (of QED) Capital One broke new ground as a monoline credit card bank that married technology and data science before that was a thing in banking.

Fast forward 30 years and Capital One is a top 10 bank and one of the leading credit card issuers in the U.S. Now, it is looking to get even bigger with the announcement yesterday that it is planning to acquire Discover for $35 billion.

This will be an all-stock deal that values Discover at a 27% premium over its closing price on Friday. It would also give Capital One its own card network, providing opportunities that are currently only available to American Express.

It will also give Capital One an even larger credit card customer base.

Of course, this has to pass regulatory scrutiny before the deal can close but the commentary I was reading yesterday sees approval as being very likely.

Things are about to get even more interesting for payments networks.

Featured

> Capital One Is Buying Discover Financial for $35 Billion

www.wsj.com

The deal would combine two of the largest credit-card companies in the U.S. at a booming time for the sector.

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USA: What Capital One would get from buying Discover
Capital One Financial’s proposed acquisition of Discover Financial Services would create a credit card behemoth with its own payments network. The deal is likely to draw tough regulatory scrutiny, though analysts say there are many compelling strategic reasons for the combination.

USA: Big banks charge higher credit card APRs than smaller issuers, CFPB says
The median interest rate that large credit card issuers charged consumers with good credit in the first half of 2023 was 28.2%, compared with 18.15% at smaller banks and credit unions, according to a study by the Consumer Financial Protection Bureau, which is on a campaign against excessive fees.

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Peter Renton is the chairman and co-founder of Fintech Nexus, the world’s largest digital media company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.

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