Capital One and Discover can merge, say regulators

Two of the country’s largest credit card companies are about to merge after the main banking regulators approved the agreement on Friday, despite concerns among certain advocacy and legislative groups that this could lead to higher and less choice for consumers.

Capital One received the green light from the Federal Reserve Board and the Currency Controller Office to acquire Discover Financial Services as part of an agreement of around 35 billion dollars announced in February 2024. Capital One, the country’s ninth bank, with 479 billion dollars of assets, issues credit cards on the networks managed by Visa and Mastercard. The acquisition of Discover will give it access to a credit card network of 305 million card holders, adding more than 100 million customers to its base.

The banks, who said they expected the agreement to end on May 18, argued that the merger would create a stronger competitor for the network space giants: Visa and Mastercard. The agreement “will increase competition in payment networks, will offer a wider range of products to our customers, will increase our resources devoted to innovation and security and provide significant benefits,” said Michael Shepherd, interim managing director of Discover on Friday.

But after the announcement of the agreement, the concerns of consumer defenders were quickly answered concerning concentration on the credit card market, because the country’s largest credit card issuer would control its own network.

“The federals were mistaken – he therefore came across the prosecutors general to intervene against the merger of a damage and anti -competitive capital,” said Jesse Van Tol, the director general of the National Community Reinvestment Coalition, in a press release. The group, which promotes access to banking services, has opposed the agreement since its announcement.

By announcing its approval, the Fed also said that it had a fine of discovery of $ 100 million to overload certain exchange costs – transaction costs that a merchant bank pays to the bank issuing credit cards – from 2007 to 2023. The currency composition office, in a Friday statement, said its approval of the transaction was conditional.