Merchants Say Capital One/Discover Deal Won’t Bring Competition

The merger highlights the need for passage of the CCCA.

February 22, 2024

The Merchants Payments Coalition said Capital One’s plans to acquire Discover won’t lead to badly needed competition over credit card swipe fees unless the Credit Card Competition Act becomes law.

“This shows Capital One realizes the Credit Card Competition Act is going to pass and wants to be prepared to compete for merchants’ business once that becomes possible,” MPC Executive Committee member and NACS General Counsel Doug Kantor said. “Visa and Mastercard lock banks that issue credit cards into a centrally set scheme of fees and prohibit them from allowing competitors on their cards. No merger can change that bar to competition—only legislation can. If the CCCA is passed, Main Street businesses and their customers get competition regardless of whether the merger goes through. But the merger alone doesn’t get us to that goal.”

Capital One announced Monday that it plans to acquire Discover with the goal of building “a payments network that can compete with the largest payments networks and payments companies.”

The move comes less than a week after Senators Josh Hawley (R-MO) and Jack Reed (D-RI) became cosponsors of the Credit Card Competition Act, bringing the total number of Senate sponsors to six, along with eight in the House. In addition, Senate Judiciary Committee Chairman Richard Durbin (D-IL), one of the lead sponsors of the bill, announced just last week that he plans to hold a hearing in April.

“The new bipartisan cosponsors and impending hearing add strong momentum for passage of the bill,” Kantor said. “Capital One must see the writing on the wall.”

Credit and debit card swipe fees—which have risen 50% since the pandemic and reached a record $160.7 billion in 2022—are most merchants’ highest operating cost after labor. The fees are far too high to absorb, especially for small merchants, and drive up consumer prices by over $1,000 a year for the average family.

Visa and Mastercard—which control over 80% of the market—each centrally set the swipe fees charged by banks that issue cards under their brands, and also block transactions from being processed over other networks that could do the job with lower fees and better security. The legislation would require banks with at least $100 billion in assets to enable cards they issue to be processed over at least two unaffiliated networks—Visa or Mastercard plus a competitor.

While networks like NYCE, Star and Shazam, which already process Visa and Mastercard PIN debit card transactions, have been most often cited as the likely second network, Discover has been among potential competitors because it already processes Discover credit card transactions at 70 million merchants in over 200 countries.

NACS members are encouraged to reach out to their members of Congress and ask that they support the Credit Card Competition Act. NACS makes it easy for retailers and suppliers to send a message to their legislators via the NACS