Capital One’s $35 Billion Bid to Aquire Discover Financial and What It Means

This week, Capital One announced that it would attempt to acquire Discover Financial for about $35.3 billion. The deal would make Capital One the largest credit card company by loans, surpassing JP Morgan.

The real key to the deal, say experts, is the opportunity to take advantage of the digital connection between consumers and merchants which goes beyond the scale of the deal in terms of importance. In comparison to most large United States financial institutions that have a century or two of history, Capital One is a relative newcomer and has risen in prominence.

The bet with Discover is that the deal will help position the company in the area of global payments…. one of the hottest topics in the banking industry.

The payments market is more than a trillion dollars and has multiple competitors from fintech firms to traditional banks looking to compete. Discover’s payment network is the key to the deal.

Fairbanks, CEO of Capital One, stated this week,  “Owning a network allows us to deal more directly with merchants rather than a network intermediary. We create more value for merchants, small businesses, and consumers and capture the additional economics from vertical integration.”