CardsFTW #156: Discover Capital One / Capital One Discover

Discover Capital One

It’s official: after 15 months, the Capital One acquisition of Discover has closed.

I didn’t want to be the only fintech or cards newsletter not to write about this. Also, I’ve been receiving a lot of questions.

I don’t have a crystal ball, and strangely Capital One didn’t hire me to tell them what to do with their $35.3B, so I guess I’ll just have to make some predictions.

The Discover Card portfolio will be rebranded

These two banks spend billions on marketing, some $5.6B combined in 2024, according to research by EMI Strategic Group. Getting rid of a brand is a risky value proposition. You’ve spent billions building it up, imbuing it with personality and meaning. Now you’re just going to throw it away? Yes, I think so. 

In some industries, like grocery stores, it is famously hard to change brands. That’s why Kroger still has Smiths, Fred Meyer, Jewel, Osco, etc., etc. In banking? Not so much. Does anyone remember Chemical Bank? Washington Mutual? People hate some banks, but I’m not sure people love a lot of banks. (Love is what makes Subaru, Subaru. It does not make Chase, Chase.)

Both brands have more modern and playful brands than some of the older brands. I’ve been enjoying Discover’s sort of weird commercials over the past few years, like the spots where people talk to themselves

and the spots with Jennifer Coolidge.

Capital One is famous for its “What’s in your wallet?” line, although I prefer the Samuel Jackson ads to Jennifer Garner's.

Look, I cannot believe that she flies commercial and needs an airport lounge. That’s just ridiculous.

By shifting the Discover portfolio to Capital One, the company will receive the benefits of the loan book and revenue, start to see what running a Capital One card on the Discover Network looks like, and save on marketing. Here's hoping for some Jennifer+Jennifer commercials. (Turns out, these two had a little viral Instagram moment back in 2023. Please enjoy.)

Network Rebranding

Speaking of rebranding, I think Capital One will also rebrand the network. That is a very long process, because there are a lot of websites and stores with little Discover logos all over them. I still sometimes see Novus Network logos.

I imagine we’ll see something  like “Discover by Capital One” or “Capital One Network, powered by Discover” while there is a slow migration over 5+ years.

Debit Network Conversion

The biggest win for CapOne might be moving all of its debit cards from Mastercard to Discover. As a three-party network, Capital One will be able to earn higher interchange, without pesky Mastercard rules to follow. The Capital One brand is so big that I think users will still find easy acceptance. Some people still think Discover has acceptance problems (hence the ad campaign), but I think the overlap is greater than 99%.

I imagine they won’t do a full reissue because it’s expensive. However, as your card expires, I think you should expect to get a new Discover network debit card.

No Credit Network Conversion

I do not think Capital One will convert credit networks. I think legacy Discover Cards will stay on Discover, and legacy Mastercard or Visa cards will stay on their networks. If you love to travel globally, you’ll want a Mastercard, not a Discover (except maybe in Japan; they have great Discover acceptance!)

At some point, when the back-end infrastructure is all fixed (so in 5 years?), cardholders will be able to call in and change networks on demand if they care. (Other major banks already allow this.)

Fintech Implications

Discover has long been interested in third-party issuing to get more value out of their network. However, uptake has been limited, due to Discover’s challenged network brand position. It’s possible for a three-party network like Discover to operate in a four-party way for some partners (Amex does this as well), but I don’t think this will be a priority for CapOne. They may come back to this over time, but core integration will provide huge value and distract from this type of optimization.

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Barlcaycard Reboots GM Rewards Mastercard

I've been publishing CardsFTW for so long now, that some credit card portfolios have changed hands more than once. In CardsFTW #3: Neobanks are Getting Into Credit, I noted that Goldman Sachs had announced it was acquiring the GM Credit Card portfolio from Capital One. I covered the card launch in CardsFTW #44: Debt, Cash, Metal, and Cars. By CardsFTW #105: New & Improved Corporate Cards rumors had surfaced that GM was going to move the portfolio to Barclaycard from Goldman Sachs.

Now, here we are: the launch of the new Barclaycard GM Rewards Mastercard. (I note the card art has evolved a bit).

The new card earns 10x points on GM purchases and 3x points everywhere else. What are GM Rewards points? Well, you can peruse the GM rewards site to learn about how to use the points, like buying or leasing a new GM car, accessing services, or exclusive experiences, like the Corvette Driving School. According to Nerdwallet, the old GM points were worth 1.0 cent when used towards the purchase of a new car, provided your dealer participates.

I have heard in the past that some pricing programs don't allow you to use points, meaning the points don't save you much, but on the other hand, if you really can value points at 1 cent per point and you earn 3 points on all purchases and you have a GM car and pay for service at 10x and you're going to buy a GM again, that's a pretty darn compelling offer with a minimum 3% cash back on everything. That's a lot of qualifiers though!

BILT Adds Japan Airlines

I wrote in CardsFTW #153: Buckle Up for Rewards that BILT was adding a lot of partners, including JAL, but then the JAL web page went away.

Well, it’s all official now. Read more at NerdWallet.

GiveCard Aids LA Wildfire Survivors

As many readers know, I live in Pasadena, CA, and have seen the impact of the LA wildfires up close and personal with my friends and community. I wanted to give a quick shout-out to GiveCard for helping to facilitate cash payments to survivors. Great work!

MoonPay Mastercard

Say “moonpay mastercard” five times fast.

It’s starting to feel like there is a new stablecoin or crypto card announcement every week! This week, we saw Mastercard announce new stablecoin cards with MoonPay. The new card is powered through Iron, which MoonPay recently acquired, and is set to allow integration of non-custodial crypto or stablecoins to the card. There isn’t a ton of information out there yet on the card, so we’ll keep watching.

Note: Mastercard is not yet accepted on Earth's actual Moon. Someone in compliance should require a funny disclaimer about this.

CardsFTW

CardsFTW, released weekly on Wednesdays, offers insights and analysis on new credit and debit card industry products for consumers and providers. CardsFTW is authored and published by Matthew Goldman and the team at Totavi, a boutique consulting firm specializing in fintech product management & marketing. We bring real operational experience that varies from the earliest days of a startup to high-growth phases and public company leadership. Visit www.totavi.com to learn more.

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