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Comment by christophilus | Hacker News Reader

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.

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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?

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.

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.

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.

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.

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