Capital One to buy Discover Financial in $35B stock deal
reuters.com
reuters.com
Products that you buy have their marketing priced in. Even if you don't see the adds you are still paying for them.
Marketing costs are not included in Gross Profit Margin calculations, and don't have an impact on COGS.
Marketing spend is primarily used to grow your TAM and channel customers to your product, but is very marginal spend wise.
They are however building more “solutions” to try and capture more of the transaction fees, but most people’s disdain for the payment rails would be better redirected at the banks in this case.
Networks (credit card rails) are dead long term. Capital One is buying a less than prime customer base instead of organic growth (plus the deposits). The profit is in the revolving interest on a customer base that carries a balance, not the interchange and network.
https://investorrelations.discover.com/newsroom/press-releas...
This should come as no surprise, as subprime is what Capital One does.
https://newrepublic.com/article/155212/worked-capital-one-fi...
Tangentially, it’s questionable how sustainable this is. This customer base is under material financial stress, and no one knows what’s going to happen next.
https://fred.stlouisfed.org/series/CCLACBW027SBOG
https://fred.stlouisfed.org/series/DRCCLACBS
https://www.cnbc.com/2024/02/06/credit-card-delinquencies-su...
I find a lot of these kinds of critiques of subprime lending to be disturbingly patronizing. The notion that some third party (the government, presumably) ought to be decreeing that people whose credit is (in this article’s words) so bad that they can’t qualify for a $300 limit at 27% interest, should just not be allowed to access legal credit at all. Terms get worse as you prove you’re an unwise risk. That’s just math. If you ask the people who are opening these credit cards, they’ll tell you that yes they do want the credit. They would rather have that than not have it. And they’re adults. And suspiciously, it’s only years after voluntarily taking this money that some of them turn around and complain about “predatory lending.”
If we ban all forms of subprime (or make it impossible with interest rate caps, etc) the most desperate bad-with-credit people, whom we’re supposedly trying to protect, will still find a way to borrow money anyway, at far worse terms—this is what loan sharks do. You can’t fix humans with regulation.
But heh, that’s just the law. We can change the definition of legal credit with the stroke of a pen (see above).
I think the argument is that it's not protection. If someone won't lend to you at 25% (but they would at 27%), then you can't borrow. Is it protection to just prevent those people from borrowing at all?
https://www.law.cornell.edu/wex/usury
At least in the case of auto loans, usury limits do not limit subprime credit access. If you want to refer specifically to deep subprime unsecured model profitability, if it’s profitable, clearly there is room for margin compression through interest rate limits.
https://www.fdic.gov/analysis/cfr/consumer/2015/presentation...
I do not understand what you're trying to say here. We're talking about
- putting an upper limit on the interest rate for loans (which is what said usary limits _are_), and
- if that means some people cannot get loans, and
- if that inability to get a loan is really helping that person
The fact that usary law exists and puts a limit on the interest rate for loans doesn't answer the question, since it's only the starting point from which the question is asked.
That being said, what you linked seems to say something along the lines of
1. For dealer + bank loan setups, the usary limits do indeed reduce the ability of the dealer setup a loan (with the bank) for a buyer. This is the case we were originally talking about, for which we have an unanswered question.
2. For BHPH (the car dealer is the one doing the loan), the limit is worked around by increasing the amount of the loan. This _seems_ to be similar to buying points on a loan. This seems like a better tradeoff than "a loan isn't possible", since the buyer still has an option (where they wind up paying more by the end, but with less risk; to both parties). My thought would be that this is actually helpful for the buyer, but it's debateable.
And sometime the corporate body needs externally deroved guardrails.
That said, secured credit cards exist. No one need be given credit, to have a credit card. And secured can lead to unsecured in time.
Companies have this as a patch already. And they want to lend, so market forces work here.
And there already is a limit under ursary laws, and yet magically, we still have sub prime credit. So to both sides of this discussion I say, ursary doesn't solve having subprime, because there is always a subprime.
Remove existing subprime clients, and the next tier becomes the new subprime. It's merely a label for the "riskiest people we lend to".
Chase that label, and eventually no one will be lent to. At all.
What I'm saying is that it's hard to tell if the usary limits actually provide a benefit to the borrowers. And I'm discussing the topics related to figuring out if they do or don't.
And what you appear to be saying is that we need those limits because we've always had those limits, and because limits are good. And that the limits don't limit people because secured credit cards exist. Which doesn't really speak to the question I was trying to raise... of whether or not those usary limits provide the benefits they are supposed to.
Why? Because they've done a lot of research, and there was lead up, there were issues, that caused those laws to exist. Study that, before we ponder is what I say.
Yes, I understand and agree with the concept of Chesterton's Fence. And examining that context and the logic for those laws is precisely what I'm trying to do here.
But a lot of people just straight up don't understand interest (despite it being within their capabilities) and e.g. make minimum payments on their loans and complain when the balance goes up. A particularly egregious case (because the people in question are educated) is when people make minimum payments on student loans and don't seem to understand why the balance is increasing.
That's the entire profit margin of some businesses. At least some places like L.A. are taking tiny steps to prevent a total takeover by these assholes by outlawing "cashless" businesses.
I was disappointed by many of the "reforms" passed under Obama, but this one in particular and some other banking-related ones stand out as truly helpful.
Only downside was their built in travel insurance didn’t cover me rebooking a flight because the first airline gave me a refund when they cancelled at 3am with me and my family staying in a hotel room across the street from the airport for a 6am airport arrival
Yes we got refunded but buying 4 tickets with a new airline the morning of our travel date cost me an additional $1800 over my refund. I guess there is no built in credit card insurance for that circumstance . (Screw you for leaving me stranded JetBlue!)
So you start getting notifications from vendors that they canceled your orders right before Christmas, because of trouble with your card. When you call AmEx and ask why the fuck you weren't notified of fraud on your account, they say (and I quote): "Oh we don't do that. We wait for the customer to get in touch with us."
The monumental stupidity and irresponsibility of this "policy" should be evident and disqualifying.
At least Bank of America sends me a text and a popup.
I have been proactively notified about fraud by Amex, Discover, as well as other banks. Amex seems to be the loosest with allowing questionable but valid purchases, and my Visa cards the strictest.
Here's another one that relegated my AmEx card to a drawer: To redeem airline-ticket benefits, AmEx forced you to use their own Web portal to book your flights. This inept portal considered LaGuardia and Newark a connection. As in... you can walk from a terminal in one to a terminal in the other to catch the next leg of your flight.
WTF.
For two years, they used the card routinely, paid if off religiously...sometimes having a monthly spend three times the limit.
They would periodically request either a security deposit refund or to have their credit limit raised - more security deposit or not. Constantly denied, automatically, even when trying to escalate it with customer service agents. I forget the term, but when you essentially trade in one type of card for another from the same company - tried that too. Denied.
Finally, on a whim they tried another company, and got instant approval for an unsecured $3,000 limit card.
They stopped using the Capital One card except for a service or two that totaled $10, maybe $20/month.
2-3 months later, Capital One did a soft pull where the new card showed up and within days of the pull, refunds the security balance and moves them to an unsecured card with $3k credit limit.
Once they had the additional data that another company evaluated them as trustworthy, their trustworthiness to Capital One seems to have gone up. They didn’t want to be the only one bearing risk.
My experience with the Capital One secured card is the same as their story.
And the difference between the two companies here is the difference between them in every way.
Even little stuff like when I give my info to Discover’s customer support robot before I talk to a human, the human has all the info. Meanwhile when I do the same with Capital One customer support, I usually need to give the same info to the human again.
They get the interest on the deposit and lower costs (fewer transfers per month paying off the balance of the card.) They didn't care.
They didn't have good credit, so the Capital One card helped them establish it.
Then they got a better card with another company based on that credit.
Now having two cards improves your credit further, as well as using a lesser proportion of your overall credit. So Capital One upgraded their card.
Literally all of this is working as intended and it's just credit score algorithms. Your friend didn't waste two years on the Capital One card -- they built credit history with it.
While I don't know exactly what's going on in your friend's case, this makes for an unprofitable customer from the credit card company's point of view.
Now, obviously they want to get paid, but for them the ideal customer is one who maxes out the card and then makes the minimum payment every month, thus incurring an interest charge, or better still, makes the minimum payment, but late, thus incurring a late fee on top of the interest.
Customers who pay off the card every month don't provide any interest to the credit card company.
That being said, all my eggs in one basket is terrible (though instant transfers + 4.35% savings is great - I keep about $30 in my checking and transfer over whenever a charge will go through, and thus maximize my interest gained!)
https://www.viobank.com/cornerstone-money-market-savings
I remember when people used to be excited about 1% gains...
I fear a bank locking my account(s) and unable to pay bills.
You want the government to step in because you don’t like what you’ve heard about capital one’s customer service and work culture?
And don't bother pretending to think that he wants the government to use his opinion as justification. That's obviously where you're going, so don't insult the rest of us by continuing.
The FTC should evaluate this deal just like any others and possibly slow/stop it if it finds major anti-trust issues.
1) It's hearsay
2) It's completely subjective
3) Even if everyone agrees its true including the companies, it doesn't constitute a legal basis for government intervention
I am biased, I worked for Capital One out of college for 4 years as a software engineer and had a wonderful experience. It was the best place for me to learn industry and professional engineering, and I felt the company culture / company itself was a fantastic place to work. So respectfully I disagree.
As a customer though you're right, Discover is leaps and bounds better than Capital One. Walmart of all people is suing them for their terrible customer service, and that speaks volumes. I will cancel my Discover cards if this goes through.
quota to pip 15% of the workforce, stack ranking, Amazon managers, downleveling by default, etc
As for "abhorrent views", I'm of two minds. Many of those "abhorrent views" are themselves calls to commit censorship. I don't think political speech calling for censorship should be protected by the 1st Amendment, because of the chilling effects that speech causes, even if the law itself would be immediately invalidated by SCOTUS. On the other hand, having private actors make the final call on what speech is permissible is also wrong, because we have no judicial recourse should they make a mistake. But there's also a lot of very impermissible conduct - i.e. doxing, spam, etc - that should be illegal, isn't illegal, but is only held at bay because of intermediaries having unlimited censorship power over their own platforms. From the perspective of a court, bringing these platforms into the scope of the 1st Amendment would be a net negative.
That's not borrowing from the gov. and it's not even most banks though.
So... it is highly possible/more than likely it will not go through?
[0] https://www.visa.co.uk/dam/VCOM/regional/ve/unitedkingdom/PD...
[1] https://www.mastercard.co.uk/content/dam/public/mastercardco...
[2] https://usa.visa.com/content/dam/VCOM/download/merchants/vis...
[3] https://www.mastercard.us/content/dam/public/mastercardcom/n...
A non-GPT source: https://www.lendingtree.com/credit-cards/articles/na-vs-eu-i...
Quoting the relevant statement: "American merchants pay, on average, 1.76% in interchange fees – compared to a 0.96% average in most European nations."
Most of the other sources I'm seeing are quoting even lower numbers. Transactions do seem to have less overhead in Europe than North America.
You keep talking about interchange fees
That’s one part of the equation
"If your business wants to accept credit cards, you’ll need to pay a fee. Interchange makes up the bulk of that cost which merchants pay, roughly 75% it."
It makes sense that people are focusing on the interchange fees.
I have not found a single source that indicates European merchants have fees that are comparable in scale to their North American counterparts. If you want to make that argument, you should find an actual source.
> Do North American consumers/merchants pay less in processing fees overall than European/Asian counterparts or is it roughly 1-3% all over the world?
The answer seems to be the opposite. North American merchants pay more.
"Incorrect output" is broader, encompassing other failure modes. If you ask an LLM to respond in JSON with a list of common foods, and it instead writes a paragraph of text that contains a list of common foods, then that would not qualify as a "hallucination" by my understanding of the accepted definition, but it is still "incorrect output".
One way to devalue incorrect terminology is to call it out when you see it, and use something accurate instead. That's how people learn.
Also, regulatory caps are not the real reason for lower fees. In some European countries, banks were traditionally focused on efficiency. Because merchants were used to cheap payment methods, credit cards didn't become widely accepted until the fees got low enough. Then the EU and the common market happened. The efficient banks with low fees realized they could gain market share in other countries by offering cheaper payment services. Visa and MasterCard didn't like that and tried to ban the practice. Then the EU didn't like that and eventually ended up imposing a cap on interchange fees.
"how much are payment processing fees in north america compared to europe/asia"?
All of the people who didn't vote for Trump in 2020, why would they flip from Democrat to Republican and vote for him in 2024?
The danger, as usual for Democrats, isn't people flipping to Trump, it's people not bothering to vote (or giving it to another party like the Greens) because they don't like the Dems' candidate. For the most part, Hillary didn't lose in 2016 because people voted for Trump instead of her; she lost because voters who normally would have voted (D) either stayed at home or voted for a protest party. Biden didn't have so much of a problem this way, for various reasons (voters liked him better to begin with, and they had just lived through the horrors of 4 years of a Trump presidency).
Here are some Left leaning articles on the matter: https://www.motherjones.com/politics/2019/11/biden-bankruptc... https://www.propublica.org/article/bidens-cozy-relations-wit...
But before T-mobile bought Sprint, ATT was blocked from acquiring T-mobile.
Meanwhile, TicketMaster/LiveNation/(scalping thing) has demonstrated a textbook consumer-harming monopoly for DECADES with impunity. DECADES.
And politicians and agencies wave hands over "inflation" while the four U.S. meat producers report 90% profit increases (after whining about a "labor shortage"). NINETY PERCENT increases.
Corporate toadies in Congress sit back and pretend that the Fed's feckless interest-rate hikes are all we can do. Disgusting.
Then the spectrum they had licenses to - the main reason T-Mobile wanted sprint, would have been auctioned off and probably still would have had t-mobile buy it since they needed it the most.
Besides At&T was already dealing with a ton of debt and if Verizon had bought it, the landscape would have been less competitive
It’s not just the Biden antitrust contingency it’s going to be Visa/MC and the other big banks lining up against it too. And there’s a non-trivial coalition of Republicans also against this kind of thing.
I can't think of a similarly large company HQed out east with as large a tech presence. Lots of internal tools and projects have been OSSed or productionized like at Google as well
Either way, funny.
Cap One and Discover both focus on the nearprime / subprime / thin credit / credit invisible segments (think people who have bad credit, expats, students, etc.). Cap One is excellent in their analytics on understanding people, and likely sees Discover as an opportunity to acquire new customers + improve on Discover's operations.
The network side of Discover's business is intriguing. Its nowhere near as sophisticated as Visa/Mastercard, but it is something! The idea may be to turn into an Amex focused on everything but prime consumers, and use the improved economics (from owning both sides of the transaction) to give rewards (at least something) to cardholders who don't normally see them. I doubt their intention is to build a serious competitor to the card networks.
I hope they keep that spirit of being straightforward.
More discussion over here: https://news.ycombinator.com/item?id=39433109