Discover is now part of Capital One | Hacker News Reader

Discover is now part of Capital One

discover.com

107 pointsLopRabbit86 comments

Ugh. Moving back to the US after a decade abroad, I had to get credit cards to rebuild my nonexistent credit.

Discover and Capital One both had deposit-based credit cards for credit building, so that's what I started with.

Discover's customer support system was polished and felt like a small company. I'd always speak to a polite native English speaker. When I gave authentication information to the pre-call robot (like card number, name, exp date), the customer service rep could pull up that info instead of asking me to repeat it.

Also, my Discover card kept me up to date with it's upgrade status, eventually going from a $150 credit line to a $1500 automatically and predictably. And again going to a $2500 credit line without my intervention; just from making steady payments.

Capital One's customer support system was awful. It's outsourced and I can't always understand the rep who sometimes gets mad at me for it. Any authentication information I give to the pre-call robot, the rep will ask me for again. Even the dang credit card number that is hard to give to a human. "No, that's Two as in Todd, Four as in Forage..."

And the Capital One credit card I got 3 years ago is still at $150 credit line. Apparently I have to pester them to get the credit line upgrade that the card promises, but why bother with a crappy company when I have a $2500 Discover card and good enough credit to have gotten better cards since then?

But I guess it's no surprise that the worse company to work with is swallowing the pleasant company. Just imagine all that money Discover was wasting by being a pleasant experience, like having credit lines that upgrade automatically and a customer support rep that speaks the same language.

I really like Discover for the reasons you stated. It was my first CS experience where you called a number and a person just answered...imagine that.

Similarly, I detest Capital One for a whole host of reasons.

Just last month I was looking to switch banks, read great things about Discover, only to realize they'd be absorbed soon. Hard pass.

I wish this deal were never approved. I can't see Discover going away, nor Capital One growing, as good things.

Opposite experience. I love Capital Ones interface, and their customer support is good. Usually I'll get a customer support agent state-side.

> the rep who sometimes gets mad at me for it

That's an ...unusual customer support experience.

> my Discover card kept me up to date with it's upgrade status

My capital one card does the same, it periodically requests updates to my income after which my credit line increases.

The only friction I experience with Capital One is the lack of physical presences. There are none in my entire region. That being said it is a great bank that never - and I mean never - has played games with auto-pay suddenly and silently failing at the due date (and incurring a late fee of course oopsies), or other annoyances I've had with Discover.

Agreed – Discover has great customer support. Their tech stack, however, seems terrible. They had a very messy migration of their Zelle integration and in the process seem to have broken things for many of their checking customers. Personally, I could neither use it, nor enroll my email address or phone number previously enrolled at Discover with any another bank for several months!

Capital One seems to have a much more modern tech stack: Their app is much more usable than most other banks' I've tried, and they're the only US credit card issuer I know of that actually supports 3DS without any ugly hacks that usually mean trouble when shopping at a foreign merchant that requires it. They also support a very neat authentication feature – tapping my credit or debit card on my phone – which I haven't seen with any other bank yet.

Let's see which tech stack and which customer support organization survives the merger, respectively...

Underappreciated reason, when system observations are made:

- Discover was founded in 1985 (credit card only, by Sears) and began banking in 2006(?)

- Capital One was founded in 1994 (credit card only) and began banking in 2005

Legacy systems suck, especially if the parent company has underinvested in IT modernization for decades. Delta? Southwest? And younger companies don't have to deal with the pre-digital legacy pain of < ~1990 founded companies.

Counterpoint: Amex has been issuing charge cards since the 50s, and their tech seems leagues ahead of Discover, for both charge/credit cards and checking accounts (based on my first impressions for the latter; I haven't really used their checking account as my main account).

Yes, Amex has the best app out of all banking I've used thus far. It's very fast, the UI is easy to understand, and you can do what you need to do quickly and painlessly.

The under the surface portion of the legacy system iceberg is how agile (and well-defined at interface points) backend systems are.

Most of the time, the reason a front end app can't do X is that there's no way to use/modify the internal core systems to do that.

So front end shiny is a poor litmus for how well or poorly a company's internal systems are.

Agility is probably a better proxy -- given a new business need / requirement (e.g. ACA in US health insurance), how quickly can a company execute on it?

> Agility is probably a better proxy -- given a new business need / requirement (e.g. ACA in US health insurance), how quickly can a company execute on it?

Yes, probably, but I think performance is pretty good sign too. Old legacy systems are often complex so new functionality is always bolted on-top, and not baked-in. Making architectural changes like that is risky.

And, third-party integrations are going to be preferred. So over time the application becomes incredibly slow. There's layers and layers of cruft and then calls to third parties around every corner.

From what I remember last time I checked, Discover supported OFX Direct Connect while Capital One did not. So there can be downsides to a "modern" tech stack.

> they're the only US credit card issuer I know of that actually supports 3DS without any ugly hacks that usually mean trouble when shopping at a foreign merchant that requires it

Is there a good wiki or database that tracks which issuers have good 3DS support?

> Let's see which tech stack and which customer support organization survives the merger, respectively...

I have no inside experience of either company, but I have been through a lot of large financial industry mergers and I know what's public about this one.

I'd bet heavily that it'll be some of both, but tech especially will be Capital One. Because it's larger, because it's the acquirer, and maybe above all because it's newer - a younger company with a younger tech stack that's known to be entirely cloud based.

A few years ago I decided to build some credit with a Discover secured card. And when I researched Discover, I learned about why their acceptance was lower (higher merchant transaction fees) and their overseas acceptance was comparatively lower, and that they didn't have a single brick-and-mortar branch, and so with masochistic glee, I signed up!

Discover's credit card was a great idea, I feel. The cashback rewards I can earn at restaurants are great. The acceptance hasn't really been a barrier to spending, but unfortunately I cling to my Visa-based debit, "just in case" there are merchants who can't accept Discover -- what else would I do?

The lack of branches? No big deal, considering anything important can be done through their app or website. Which are very polished, attractive and functional. They don't even 2FA me from my Chromebook.

Their customer service is amazing. I mean, call in the middle of the night to a fluent English speaker who tells you where they're located?! They are so polite and patient! Best ever experience, really. In fact, my credit union's reps are really good too. It's a small blessing.

I did not need to open a Discover Checking account, and I can't remember why I did it, but I did. The Discover Bank debit card is different than their credit cards, and therefore acceptance may be even lower. I still get cashback rewards on it.

My finances are uncomplicated. I don't much enjoy dealing separately with two banks. I don't really need to. Except my credit union has no credit card to offer me, and Discover has no Visa to offer me. So I get along. We'll see how the Capital One thing goes.

Obligatory "Capital 1" related xkcd: https://m.xkcd.com/2206/

My experience with Capital One is very positive. Their support is always solid and wait times are reasonable. The app and the website work well, though they have introduced some dark patterns in recent years. They periodically increase my credit line without prompting.

One note on raising credit limits- Capital One will raise your limit just like every other lender — they want you to have as much debt as they think you can make interest payments on.

Probably once you had the increased available credit from Disco their models said giving you more was too much risk.

I know nothing.

But this is an interesting acquisition. Capital One strikes me as a pretty well run org.

Why would they want Discover, who notoriously targets the low end of credit card custom? My guess is that this gives them the ability to increase margins by owning the entire payment layer all the way through distribution. If they slash the fees charged to merchants, this could make them quite a powerhouse.

Competing with VISA and the others is their goal here.

This is the correct answer. Discover has a payment network, which will afford Capital One the option to issue cards without relying on Visa or MasterCard. This is what Amex does.

I would assume primarily domestic cards (platinum, quicksilver, savor) will start being issued on the discover network, while travel cards (venture series) will not (initially) because of the high domestic and low international acceptance rate of Discover cards.

Discover acceptance abroad is actually not as bad as it might seem at a first glance: Discover owns Diners Club International, and as a result Discover cards are accepted everywhere Diners Club cards are and vice versa.

They also have some mutual acceptance agreements with JCB and China UnionPay and others. Just because there's no explicit Discover logo on a terminal/restaurant window doesn't mean a Discover card will actually not work.

It's not quite the reach of Visa or Mastercard, but international acceptance seems to be trending up.

Agreed - The ability to further increase that international acceptance rate leveraging existing relationships and cardholder numbers is a large part of the 35.3 billion dollar gamble Cap1 is making, and I'm willing to bet it pays off big time.

I'm riding high on Cap1, personally.

Matt Stoller seems informative on this in his blog post: https://www.thebignewsletter.com/p/the-fed-is-behind-the-cap...

Well run? Haven’t they had lots of legal issues over the years?

https://en.m.wikipedia.org/wiki/Capital_One#Investigations_a...

Seems like nothing more than the cost of doing business.

I'm seeing misleading advertising with scummy/dark patterns, spam, failure to disclose important information, plus all the classic stuff like money laundering and bank fraud.

Could be just the cost of doing business, if that business' motto is "you either fuck someone over, or get fucked" or at least "you gotta hustle to survive".

I'm so tired of all those businesses out there.

One thing I don’t understand is why people even do business with many of these scummy financial companies when credit unions exist.

Do you honestly think defrauding your customers out of billions is the cost of doing business?

Capital One’s personal lending is also notorious for targeting the mid-to-low end of credit card customers. They routinely deny people for credit cards if it looks like the applicant pays off their cards in full every month - they love a customer with a credit profile that has no negative marks but with a moderate debt-to-income ratio that means they’ll get those sweet interest payments.

That seems pretty far off from my experience. They offer auto pay, so I have paid the balance on my cc every month since I have had it without ever accruing interest. I haven't be denied other cards from them, balance increases, or anything like that.

Here is some useful information about what percentage of credit card companies' issued cards are to subprime lendees. https://bpi.com/is-the-subprime-segment-of-the-credit-card-m...

It doesn't directly confirm or contradict your statement, but is relevant to the conversation.

I would also like to remind everyone to pay your credit card balance in full every month without fail, or you are giving your credit card issuer boatloads of money just for fun.

Subprime borrowers are categorically unsophisticated. If you look at the transaction data you will frequently see patterns like someone paying the minimum balance for 15 years instead of declaring bankruptcy strategically. The amount of unnecessary interest payment is insane.

as I understand it, Discover gets to charge higher fees on debit cards (than eg visa and mc) due to some regulatory carve out, so capital one wants to take advantage of this and Discover’s payment network

Are you talking about the Durbin amendment? That's available to every bank with assets under $10B, not just Discover. If Capital One wanted higher swipe fees, there's hundreds of small banks that they can partner with to issue the cards. That's what many neobanks do.

Neither Discover nor Capital One are exempt by asset size: https://www.federalreserve.gov/paymentsystems/regii-intercha...

However, Discover is (largely; I believe at least Pulse is available to issuing banks other than Discover) also a three-party network, which is inherently exempt from the Durbin amendment: https://www.congress.gov/crs-product/R41913

Yes. This is exactly the same special advantage that American Express also has. However, Amex lacks enough know-how and presence in retail banking to really be able to issue enough debit cards to leverage this the way Capital One could.

The effect of this is that merchants end up hating taking Amex since it costs more, and I foresee Discover (which is even more niche) ending up the same way - there will simply be no reason to bother accepting Discover at all. How many people only have a Discover debit card in their wallet and no other?

I only have a Discover debit card. Discover pays 1% back on its debit cards, which is unusual. I have idly wondered why they did that. The fact that they're not subject to the restrictions on debit fees makes it clear why.

I shop for name brand stuff at Winco, a grocery chain in the Northwest US that doesn't take credit cards and makes you bag your own groceries. I'll be curious to see if they stop taking Discover debit cards if the fees increase.

First, "Capital One strikes me as a pretty well run org" != "it's clients' sophistication"

Second, Capital One also targets low end (subprime), especially relative to Amex, Visa, etc.

Capital one also targets primarily lower end customers. Many of their cards just have usage fees despite being terrible cards in general.

From the people that I know that work at Capital One.

That is certainly not the case. It's full of ex-Amazon managers that only want to pile on and then aggressively stack rank engineers to fire them. Heck they even do the whole hire someone to fire them.

> Why would they want Discover, who notoriously targets the low end of credit card custom?

More revenue and cheaper admin/labor costs since they're already in the space.

I’ll confirm this, the place is a complete mess. Better than most financial “tech” companies but the workplace and managers are SO toxic.

Though I don't know much about Capital One – I did have a credit card with them a long time ago, and I just remember their website/app being just OK.

I do hope this merger doesn't degrade Discover since I've been very happy with them in pretty much every way (both bank and credit).

Dumb question: Why are payment networks so difficult? My vague/naive assumption is it's because of complex banking/financial regulations and legacy banking systems. But honestly, from a technical perspective, I don't see it as so complicated. Anyone reading this could create a transactional system for "payments", open it to the public and scale it - basically, Venmo. The only major costs I can see are "infrastructure" and dealing with fraud. ???

Regulation. The cost of regulation compliance and tracking that you're in full compliance, and the lawyers needed to keep all of that in line.

I would imagine network effects are a pretty big barrier to entry.

Well, that kinds sucks.

It’s Ticketmaster and LiveNation all over again.

Business owners going to get gouged.

Customers going to see price of items go up as business owners pass along increased transaction costs.

Yes - this will also impact you even if you don’t have a discover/capital one card.

Soon you'll have to put up a "no Discover accepted" sign right next to the "Amex not accepted" sign.

I suspect the trick here is that capitalone issues so many other cards that once they standardize on it, merchants can't refuse their network without losing substantial amounts of business.

Or customers start bailing because no one accepts their cards and the whole thing backfires...

What C1 has to do in the short-term is give customers a deal they cannot refuse to get them hooked. They can bag em and tag em later.

Discover has something like 150-200 different card designs that people can choose from, and they let you change them out almost as often as you want. You can even have more than one active at a time - perhaps keep one for your professional adulting wallet and another for your wild nightlife wallet.

Better marketing around this would likely improve signups.

I've had one in my wallet since college; it has never been a primary card for me. But I recently needed to choose a new one and scrolled through the options on my phone. From the small photos, I chose something that looked like some sort of abstract painting. When it came in the mail, I realized that it was not a painting at all. It was way more interesting than I had imagined. And indeed, it is the only credit card I've ever had that has received compliments. Does that influence how often I pull it out of my wallet as opposed to the other cards in there? Perhaps...

> Better marketing around this would likely improve signups.

For 2023, the Capital One was the fourth largest issuer[1] by purchase volume. Post merger would put them at number three. The challenge isn't signups, it's retention. Discover being in the subprime category means it's often a borrower's oldest account and thus likely to be sticky. Capital One is no slouch either.

But also: this may not even be a credit card play. Matt Stoller points out that there's a loophole in the Durbin rules for debit cards that hasn't been a factor until today: the rules that cut debit fees in half in 2011[3] only regulate networks operating as middlemen between banks and merchants. So presumably they can take those fees and double it again, at which point it's a fascinating question of who blinks first: merchants or Capital One.

[1]: https://money.usnews.com/credit-cards/articles/biggest-us-cr...

[2]: https://www.thebignewsletter.com/p/the-fed-is-behind-the-cap...

[3]: https://www.federalreserve.gov/paymentsystems/regii-average-...

It is very likely C1 will move away from MC/Visa. There's a massive amount of money on the table for them in the form of interchange fees. They're effectively becoming the next American Express.

From a competitive landscape, this is probably a good thing - Discover never really did much issuance of cards by other banks, and this means competition against Amex.

For the record, I believe we are saying the same thing.

How common is it really that Discover isn't accepted these days? I don't have Amex, so not really sure about that, but I've been using Discover for years and I think I've only ever encountered 2 places that didn't take it – and neither of them were worth returning to anyway.

> I've been using Discover for years and I think I've only ever encountered 2 places that didn't take it

Really? For brick & mortar retail, my experience is pretty much only the major retailers accept it. Most small, local, or even regional retailers do not accept it.

I've used my Discover card at a bajillion bars, restaurants, and stores this last 2 years, all ranging from dives and mom & pops to bigger retailers and haven't had a single problem in that time. Then again, I've been living in Boston and Los Angeles, so maybe Discover is more accepted in major cities?

Interesting! I wonder if it's a regional thing. I'm in the Twin Cities, so not a small town. Some smaller places do accept it, but I find it's pretty rare.

Others have noted that it's accepted anywhere Diner's Club is - you often see the DC logo without realizing that's Discover network.

This was the Amex experience too until square came out. That little card reader that plugs into ipads and phones. These days, most small businesses are just using that, and that supports everything.

What I am actually seeing are restaurant receipts with "price for cash" and a higher "price for credit." I am not seeing this for groceries or other goods.

I understand that the "Durbin Amendment" had something to do with this.

https://en.wikipedia.org/wiki/Durbin_amendment

Had an eye exam this morning and I needed to do a $30 co-pay. Pulled out a card to pay and I was asked if it was a credit card. I said yes and she said there'd be a 3% fee for using a credit card. I switched to my Discover debit card, which pays 1% back.

My only recent experiences with this with transactions over $10 was a small restaurant and a construction project where they took the deposit on a card but would charge a 3% fee if we didn't pay by check. Many of the local convenience stores charge a fee to use a card.

I'm looking at a receipt in an Iowa restaurant that says "Total: $13.23; Pay With Cash: $12.71."

When I had Apple Card's daily cash going to Apple Cash was when Apple Cash was still a Discover (debit) card under the hood. (Last I checked it is a Visa [debit card] now.) During that time I found a bunch of places didn't take Discover and just didn't even put up a sign (even ones that had "Amex not accepted signs") because they didn't think anyone cared. It was never an issue then because I'd just switch back to the Apple Card (Mastercard), but as the only Discover card I've ever had in my "wallet" (virtual or otherwise) it was an interesting experience that left a lasting impression.

This feels weird to me. Capital One is an everyman's card company, where Discover was always a niche player for upper middle class people, primarily competing with American Express. I have a feeling that Capital One will degrade the Discover brand greatly, although in recent years they had been trying to move downmarket anyway.

I was wondering when the questionable corporate consolidation would start kicking off under the Trump administration.

Have there been any other mergers in the past few months that slipped under the media radar? I honestly expected there would have been some deals waiting in the wings prior to the election just in case.

Three major online-first banks was clearly just way too much competition. This merger fixes the situation down to the "token two" where they only have to compete on marketing rather than anything relating to actual features like product offerings, fees, website usability, customer service, etc. Now they can switch to shameless extraction mode like the regional and national brick-and-mortar banks.

Which one is the other one?

Ally. There's also Alliant Credit Union which I left out because I think their website/app usability is abjectly atrocious (and my statement was still technically correct because CU).

Admittedly I haven't kept up with new options in the past few years, but my main goal is stability for not having to redo all the setup so new startupy options are kind of inherently uninteresting.

"Questionable corporate consolidation" has been happening for decades. I do agree it will accelerate under this current orange administration.

Anti-trust laws have been watered down so much or not applied.

This is all because of pseudoscience from neoclassical/neoliberal/reaganomics economic theory

>This is all because of pseudoscience from neoclassical/neoliberal/reaganomics economic theory

What's the Real Science™ then?

> What's the Real Science™ then?

Monopolies and intense corporate consolidation are bad for everyone except shareholders and CEOs?

Cool. Great company, more competition among the payment networks should result in better and less expensive products. Maybe Discover will finally achieve its potential.

> "more competition among the payment networks"

The exact opposite of what's happening.

How? The Discover network will be substantially better positioned to influence visa mastercard and amex, which are each expensive and oligopolistic. You know anything about this, or just spitballing here?

All payment roads eventually lead to FedNow instant payments.

https://fintechtakes.com/articles/2025-03-25/the-pay-by-bank...

https://20392958.fs1.hubspotusercontent-na1.net/hubfs/203929... (page 4 specifically)

(work at a fintech, thoughts and opinions my own)

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