(CTN News) – Capital One ascended to the sixth position among major U.S. banks in terms of assets due to the acquisition.

In an earnings call held one month prior, Richard Fairbank, Chief Executive Officer of Capital One, stated that the company’s objective was to “preserve the best” aspects of Discover’s operations, including its focus on advertising and customer experience.

Discovery is set to be acquired by Capital One for $35.3 billion in 2024.

The merger received regulatory approval a month ago, despite the objections of notable Democrats and consumer organisations, which raised worries regarding less competition and potential risks for low-income clients and those with below-average credit ratings.

Representatives from Capital One and Discover refused to provide a statement in response to an inquiry. Moreover, both financial institutions announced that “customer accounts and banking relationships will remain unchanged” for the foreseeable future in comments issued on Monday.

Below is a comprehensive analysis of the advantages and disadvantages that each company’s client will face upon implementation of the agreement.

What particular ramifications would the merger have for Capital One’s clientele?

A larger Capital One may propose a greater variety of goods; nevertheless, some Democrats are concerned that this could result in higher fees.

Capital One has previously asserted that the combination will not only bolster competition against the transaction giants Visa, Mastercard, and American Express, but will also improve accessibility for low-income users.

The merger might potentially dismantle the “duopoly” maintained by Visa and MasterCard, as indicated in a white paper published in July by four economists and legal experts from the International Centre for Law & Economics.

They suggested that the merger would facilitate Capital One’s move of its debit cards to Discover’s payment networks. Moreover, it would allow Capital One to provide “more attractive products for depositors”. This category includes debit cards that provide cash back to individuals with low incomes, as well as no-fee checking accounts that do not require a minimum balance.

The ICLE group claims that the merger will enhance Capital One’s competitiveness against major entities like JPMorgan Chase, Citibank, and Bank of America. The group asserted that the acquisition would yield cost savings and additional benefits.

What are the possible ramifications of the merger for Discover’s customers?

The combination is not anticipated to yield any substantial changes in the near future. Capital One branches and customer service cannot assist with transactions conducted using Discover due to Discover’s claim that consumer accounts are not associated with the new corporate owner.

Discover consumers will likely gain enhanced access to the bank in the future through automated teller machines and branches managed by Capital One. Discover manages and possesses a single physical establishment in Delaware.

In an earnings call, Michael Shepherd, the interim CEO of Discover, stated that the transaction will “enhance competition in payment networks” and “provide a broader array of products.” Shepherd was addressing the commercial transaction. Last month, Shepherd made this statement.

California Representative Maxine Waters and Massachusetts Senator Elizabeth Warren communicated with the Federal Reserve System earlier this month against the transaction, asserting that the merger will adversely affect Capital One’s clientele.

Warren and Waters are prominent Democrats in the Senate, serving on the Senate Banking, Housing, and Urban Affairs Committee and the House Financial Services Committee, respectively. Furthermore, they are constituents of the House Financial Services Committee.

Added, “These are not two conventional banks; instead, they are credit card behemoths.”

Waters and Warren forecasted that Capital One would possess a forty per percent market share in the issue of general-purpose credit cards post-merger.

Consequently, Capital One could elevate the expenses borne by merchants while concurrently diminishing the rebates and other advantages offered to consumers due to the acquisition of this information.

The letter states, “Merchants must adhere to the terms set by Capital One’s network to access the clientele of the nation’s largest credit card issuer.” Warren and Waters assert that it is “doubtful” that Capital One can resolve the “myriad issues” currently facing Discover.

The legislators indicated in their filings that Discover erroneously categorised millions of consumer credit cards as business over a span of around seventeen years, leading to elevated interchange fees for transactions.

SOURCE: BI