Amazon Looking to Buy Capital One? | Hacker News Reader

Amazon Looking to Buy Capital One?

bankingtech.com

48 pointslefstathiou55 comments

Amazon, which has some very large amount of knowledge on your consumer spending habits if you use it regularly is now looking to get the complete financial picture for a not-so-insignificant percentage of the world.

There's some powerful stuff you can do with that.

I work for Capital One, and this is almost surely pure speculation. I wouldn't even call it rumor because there is no trace of evidence to this speculation.

I say put your skeptics head on if the title of the article ends in a question mark (and also sources cited do not directly discuss the matter at hand).

"Any headline that ends in a question mark can be answered by the word no." - Betteridge

https://en.wikipedia.org/wiki/Betteridge's_law_of_headlines

If only I'm as opinionated and eloquent.

Any journalist who dares to ask a question is wrong.

How about a wager?

My first wager is that you're not in a position to know if it's being discussed.

My second wager is that it happens. For starters I'll bet you $100 with 40:1 odds that it does happen. Happen defined as "Both parties announce intentions to merger/acquire within 6 months from today."

Are you laying or taking the 40:1. If you're laying the 40:1, I'm in, of course!

I get $4k if it does, I pay $100 if it doesn't (by 6 months end).

I'm wondering what's the easiest, legal (for US residents) way to sign this type of bet.

No, I'm not referring to complex steps involving some form of cryptocurrencies. I'm talking about something super, super easy.

p.s. I am happy to take the bet at 1:2, not at 1:40.

You are 2.5% confident that something is going on that the parent poster doesn't know about? While I applaud your willingness to bet, your first 2 sentences indicate much more confidence than your proposed odds.

I think the odds in my proposition give me sufficient edge to proffer the bet.

But you implied there was a 97.5% chance that the parent was right. You basically agreed with the previous post, while saying they were wrong.

I didn't agree. He said it would not. I said it could. I said it was more likely than he said and I would put money on it.

Your use of basically is ambiguous.

If I say there is a 97.5% chance that the parent was correct, am I more agreeing or disagreeing? WEP standard says that anything above 94% is "almost certain", so you 'basically' said that it was "almost certain" the parent was correct.[1]

[1] https://en.wikipedia.org/wiki/Words_of_estimative_probabilit...

These words you are putting in my mouth don't fit.

97.5% probability is nothing like almost certain.

I think we just have different viewpoints on precision and language, friend. I still like you!

I used to work for Microsoft. A lot of shit happened at that company that I didn't find out about until I read it in the paper, like everyone else. Kinda like how the baristas at Starbucks have absolutely no idea what I'm currently working on for that company.

So as I put on my "skeptic's <hat>", the first thing I'm skeptical about is a random employee of unknown level telling me it won't happen.

One thing i wonder about is: Amazon has many initiatives where a reduced cost capital(say by 3%, the average net interest spread) , could mean a huge difference for itself . Plus it has tons of data(and software) which affords it to manage risk extremely well.

As for scale,let's be optimistic and say it's the whole of Amazon's gross-merchandise value(GMV) , i.e. $225B in 2015 , i.e. not that far from capital one's assets.

So in theory, Amazon could offer more attractive online bank account plan from most anybody, by sharing it's gains with the users. And the marketing is free.Heck i can even see activity based marketing happens - "if X people from this neighborhood open saving plans with us, we'll start-a-local-warehouse/parcel-locker/grocery-service-point/etc"

So why would they want to acquire capital one?

I don't know your role position at Capital One but unless you were way up in the management chain, why do you think you would have even heard anything about this?

can amazon even afford to buy ALL of CapOne? Is it just their banking business?

Generally any information regarding an upcoming merger or acquisition is extremely tightly controlled. Unless you work in the executive team or a team that would be directly involved in a potential merger, it's unlikely you'd hear anything.

I too work at a large, public company. My company acquires companies semi-regularly and I've never heard about any of them ahead of the public announcement.

> Regulators in the US are taking interest in the large sums collectively kept on stored value cards and the associated mobile apps. “The money stored on these cards – and any similar stored value accounts – are effectively the same as bank deposits and as the total value now exceeds the deposits at smaller US banks, regulators are seeing a need to apply oversight,” O’Brien says.

What exactly are these "stored value cards" with associated mobile apps? Things like gift cards? Or are they talking about Apple and Android Pay?

Perhaps they mean apps like Square Cash or Venmo? Both of those hold money for users in a "virtual" account until the user chooses to move it into a real banking account.

It sounds like they are talking about gift cards, gift card apps, and alternative payment apps. These days that's probably a very large umbrella.

Everything from a Google Play or iTunes app to apps like BlendCard, Gyft, Dwolla, Venmo, Square Cash, etc... would likely fall into this. Depending on how PayPal is structured any funds you have sitting in a PayPal account could also fall under this umbrella; which that alone is probably a significant number these days.

Until they recently (and abruptly) closed, I had a house account at MyFitFoods. You put $500 on their house account and got a $25 bonus, and was able to make food purchases from it. When it ran low you could top it up.

A similar comparison would be prepaid cellular phone service. You put money on the account and draw on it by making calls.

Can somebody explain how Amazon could buy them if Capital One's total assests are worth $334 billion? Presumably the valuation would be some multiple of that. Amazon doesn't have enough liquid cash, so how would they do it?

Capital One's current market cap is around $44 Billion. They may have $334 billion in assets, but its not their money. It's their customer's.

By comparison, Amazon's market cap is around $400 billion.

Ironically, they both seem to make around the same amount of money.

Amazon heavily reinvests the money it makes, unlike Capital One, which pays dividends to shareholders quarterly.

I would imagine it is asset under management. May be something like hedge funds which have 100s billion dollar assets but that is money of clients not the value of hedge fund.

Probably a combination of asset merging and cash pay out.

You've raised like five questions in three sentences, so here's the low down: Capital One isn't worth $334B. It manages assets worth $334B. Those are the totals of the deposits creditors have with it. Capital One is worth $44B as of this writing[1].

Many companies have fixed capital assets worth less than the company, because they've financed those assets with debt, which would have to be acquired or repaid at the time of the company's sale. Some companies have close to no fixed assets but are worth much from their prestige or ability to execute. Some companies have secondary liabilities that are worth much more than their assets - See Yahoo, who were at one point worth less than the valuation of their holding in Alibaba.

Buyouts are rarely done in cash. They're often done in financing, with several banks lending money to the company to cover the total purchase price. They're also frequently done in stock, where the buying company gives the acquired company shares in the buyer equal to the value of the acquired - Either by issuing new stock, or by simply buying up the old, or some combination of the two.

[1]https://www.google.com/finance?q=NYSE:COF

Buying Capital One with Amazon stock would probably be an appealing proposition to Capital One stock holders: http://finance.yahoo.com/chart/AMZN#eyJjb21wYXJpc29ucyI6IkNP...

Thanks for the information. This opens a little rabbit hole of terms to crawl Wikipedia for.

It's very interesting that you thought I raised five questions, when my intention was to actually clarify my single question :)

Maybe they could get a favorable rate from Capital One ;) Would it even be legal for a bank to finance the purchase of themselves?

There is zero chance the new administration is going to make new regulations that are unfriendly to financial institutions.

I am not a fan of the new administration, FTC, CFPB, or even FDIC, but all regulations have disparate impacts on banks depending on their size and structure. The large banks have benefited from recent complicated and nebulous regulations with high compliance costs. Re-regulation is why the too-big-to-fail banks have gotten bigger. Deregulation would benefit smaller banks, and harm the larger ones.

I guarantee that big banks will be involved in any deregulation, and will be working to steer it in their favor for competitive advantage. It happens with any change, whether it's adding regulation, re-regulation, or deregulation.

Amazon's business model is based on great service to customers at a low price. Capital One's business (edit: their credit card business) is based on screwing consumers for as much money as they can legally (another edit: my impression is based on anecdotes from many years ago, before the ING acquisition).

Those aren't very compatible business models. If Amazon wants a bank, there's probably a lot of options with better synergies.

> Capital One's business is based on screwing consumers for as much money as they can legally.

Harsh words for someone who runs a bank with no overdraft fees!

I always thought their business model was giving people with starter credit (like college students) credit cards and car loans.

> I always thought their business model was giving people with starter credit (like college students) credit cards and car loans.

This is what I've seen of them. They offer college students (who don't know better) really bad credit card deals with high fees and high rates and sneaky "gotcha" contract terms.

Although I may be overly harsh since my impressions of them are all based on their credit cards. For all I know, their other banking services are ethical.

Also to be fair: by the time Capital One acquired ING, I was too old to know many college students so my anecdotes were all from before then.

After using TCF Bank (Minnesota) and Wells Fargo (both are trash), Capital One has been amazing to me. I've never had any problems with Capital One. I began as an ING 360 customer (which was lightyears better than C1...) and stuck through the transition and never had any issues. Also use their credit cards.

I never got the impression that they were predators.

My first credit card in college was from Capital One. I personally thought they were great. They gave me my cashback rewards right away instead of quarterly, and the one time I forgot to make a payment on time (before I set up autopay), they forgave it and initiated the payment over the phone. After that I just never carried a balance and never had to worry about their fees and rates. Also never ran into any "gotchas".

They gave me a first credit card with 1.5% cash back rewards, a nice website and easily accessible customer service over chat. Not once have I cared what the interest rate was, of course, so they could be getting you there.

The rewards system works better than everyone's current favorite CSR, because you can use it to refund past purchases instead of just buying hotels with points in the Chase store.

The benefits that try to compete with Amex (like extended insurance) are harder to use since you have to actually call in instead of just filling in web forms.

After yours and other comments, I suspect my information is just really out of date.

Here's some stories I had heard back when I was in college: no cash back or other rewards on the card for students, $2/month on an unused $500 credit line, a $38 late fee (late = paid the day due after noon eastern time, regardless of consumer time zone), and a rate that skyrockets after any missed payments.

Again, these may have changed since then since there's several replies of people with good experiences.

I had one of their cards years ago when I was in college. It was as you describe. Years later I now have a personal and business card with them and the terms are good with a decent mileage program (and they have a real nice mobile app). Of course, now I have excellent credit/ income. I think they're all the same In That regard. If you have poor/no credit you're going to get taken advantage of.

I've been a happy Capital One customer for the past 7 or so years. Though I've never paid them a penny of interest. Just my 2 cents.

In addition to what others have said (good rewards), Capital One is also a good card to travel with since they don't charge foreign transaction fees. I keep an account with them because I save a ton when I go overseas.

If you're complaining about high fees and interest rates, you're not using your credit card right.

My thoughts exactly. I opened up an ING Direct account and a Capital One credit card back when I was in undergrad. I was a bit worried about losing all the niceties of ING Direct when they were sold to Capital One, but Capital One 360 operates and feels exactly the same, just without the orange color scheme.

As for their credit card division, I personally haven't had any issues.

I was skeptical of the transition but it really hasn't been bad.

Until a month or so ago when they switched the login process to include having to click through about 5 different links. I'm glad my guesses worked for how to navigate through all of it. I'm tempted to leave just because of this.

1. Click sign in

2. Click sign in under Personal Banking

3. Enter user name and hit enter (assuming banking is selected)

4. Select Capital One 360

5. Enter password and hit enter

Done

Maybe its because http://capitalone360.com/ now redirects to https://www.capitalone.com/bank but why can't they have a single login for all account types?

Amazon would ruin the good culture growing at capital one.

Implying what exactly?

Dupe https://news.ycombinator.com/item?id=13662945

It doesn't count as a dupe if the post didn't get significant attention: https://news.ycombinator.com/newsfaq.html. HN allows a small number of reposts in such cases because good articles often need multiple cracks at the bat to get seen.

I'm not sure this is a good article though. It seems to be nothing but a rumour.

What makes a rumor good or bad? This certainly isn't the first article on here that is speculation.

Supporting evidence, I suppose?

Reply on news.ycombinator.com