Comms Around Capital One's Discover Acquisition
/If the deal is approved by regulators and shareholders, Capital One’s acquisition of Discover Financial will create the largest credit card company. Here are two positive-news messages for students to analyze, as much for what’s said as for what’s not said:
Capital One press release. As expected, the release explains the benefits primarily to investors. A few throw-away lines are included for other stakeholders: something about “making a positive difference in our communities” and “great deals for consumers.”
Capital One CEO’s video message to employees. Posted on Capital One’s website under “Newsroom,” the video is as much an external as an internal statement. Students might comment on the CEO’s big arm movements and natural, well-paced delivery (although they might think it’s too slow and too long).
As of now, nothing is posted on Discover’s website, which is surprising. When the Marriott Starwood merger was announced, Starwood associates received a separate email and a video message from both CEOs.
Messages are consistent, but other reasons help us understand the decision. The acquisition is a protective move for Capital One. New regulations might make it difficult for credit card companies to enjoy the high fees they’re accustomed to charging. Discover’s payments network helps Capital One compete against larger players and growing fintechs that offer greater convenience and charge lower fees. Instead of paying “tolls” across Visa and Mastercard networks, Capital One would charge fees from all transactions over Discover’s network.
Real benefits to consumers are unclear. Other than more places that accept the cards and a few extra perks, the acquisition bets on increasing credit card debt. Capital One already has a large share of high-interest-paying customers who are among the most likely to default.
