(StraightNews.org) – Capital One is buying Discover Financial Services in a $35 billion deal. Under the terms of the agreement, Discover shareholders will receive just over one share of Capital One stock for every Discover share they own. CEO Richard Fairbank said the arrangement will bring together companies with “complementary capabilities and franchises” that can compete with the largest credit institutions in the market.
A press release issued by Capital One states that the deal will create a payments platform with 70 million acceptance points in 200 countries and allow Capital One “to leverage its customer base, technology, and data ecosystem” to generate more sales and “great deals for consumers and small businesses.”
The deal is due to be completed by the end of 2024 or early 2025, and when complete, Discover board members will join the board of Capital One.
Some experts and lawmakers, however, are questioning the impact it could have on credit card users. Senator Elizabeth Warren has called on regulators to block the deal, saying it will impact competition and consumers will pay the price with increased fees and credit costs.
Some industry experts agree with the Senator and warn against shrinking the credit market. Adam Rust, director of financial services at the Consumer Federation of America, said the credit card market is already concerning, adding that the Capital One deal will heighten those concerns.
Other industry insiders, however, say blocking the merger could be seen as favoring credit giants Visa and Mastercard, both of whom have enjoyed an enormous boost through 2022 and 2023. Visa and Mastercard both grew their revenue by 11% and 12.5% in 2022 and, combined with American Express and Discover, generated $10 trillion in purchases last year.
A February report from the Consumer Financial Protection Bureau showed that credit card companies are already charging more for credit than small banks, and critics of the Capital One – Discover deal say it could squeeze consumers even further.
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