When Capital One reached into their bag and pulled out a cool $35.3 billion to acquire Discover Financial Services, they ended up doing a lot more than just shuffling some names around on a corporate roster.
The result of the acquisition is nothing short of a seismic shift, and will end up rearranging an entire ecosystem of merchant fees, card acceptance, and network competition. This is one of the highest-profile card portfolio swaps in the last 5-10 years and could seriously disrupt your upcoming payments
Although this kind of shake-up is rare, it’s not unheard of. That said, Visa and Mastercard still process somewhere around 80% of U.S. card payment volume, according to 2023 Nilson Report Data. So when the third-largest player (Capital One) decides to absorb a card issuer that also owns its own network (Discover), we’re suddenly looking at a completely different landscape.
Let’s get you situated so that you can pivot, not panic.
Capital One has gone from issuer to network owner
When a major card issuer like Capital One acquires a distinct, established payment network like Discover, the end result is that the combined entity becomes a vertically integrated network owner.
Capital One was actually a customer of the Visa and Mastercard networks before the deal, and was reliant on their rails. With this acquisition, Capital One now owns the infrastructure needed to process its own transactions, along with the PULSE debit network.
The result is that Capital One has gone from a major volume source for the dominant networks into a direct, end-to-end competitor. It’s like someone pulled a lever and moved the train that runs on the core transaction rails—the train, by the way, that’s pulling the big box cars full of interchange revenue—onto a completely different track.
And this lever ends up being a powerful new tool for cost control and market negotiations. All in all, this is a huge win for both Capital One and Discover.
Merchants with cards-on-file (COF) and subscription models should know that they are facing a serious operational and financial threat.
When Capital One moves its existing card portfolio over to the Discover network, the card numbers will change. This swap will come in waves, not as a single project. That means merchants won’t know exactly when it happens for them.
You’re looking at lost revenue should your systems fail to capture and update the new card numbers in real time. You can prepare for that, but first, let’s look at a few more reasons why this merger could be a big deal for you.
How the Capital One/Discover merger could affect your bottom line
Merchants like yourself know that events like this one might start out as a high-stakes operational threat, but they end up being a massive opportunity for those who are ready to capitalize. While there are operational challenges with this brand swap, you’ll find that there are some new levers for cost and control that could really help to improve your bottom line.
We think you should care about this deal for these four key reasons:
- Imminent COF disruption: The integration of Discover Bank into Capital One on May 18, 2025, signals the coming migration of Capital One's card portfolio. When Capital One switches their cards to the Discover network, those card numbers will change. This massive card swap will be deployed in unpredictable waves, resulting in lost revenue for any COF merchant whose systems cannot handle the real-time credential change.
- Increased network competition: With Capital One now owning a network, the pressure on the "Big Two" (Visa and Mastercard) to maintain their near-duopoly grip intensifies. Greater competition usually translates into better terms for merchants in the long run, challenging the historical fee structures across the board.
- Enhanced debit routing flexibility: Discover's PULSE debit network is a critical asset. Federal law (the Durbin Amendment) already mandates that merchants have a choice of at least two unaffiliated networks for debit routing. This merger reinforces a powerful, lower-cost alternative, giving you more options to control fees at the point of sale by making smart routing decisions.
- A new negotiation lever: If you’re handling high transaction volumes, this combined entity gives you a whole new business to negotiate terms with. Having a powerful third alternative payment provider strengthens your position when discussing fees and terms with your existing payment partners just by leveraging the threat of moving more volume to a viable competitor.
Here’s how you need to prepare for the Capital One/Discover merger
To make this merger work for you, you are going to need to understand your current payments profile and where the new Capital One-Discover entity fits in. Here are some instructions on how to go about doing that.
Audit your existing COF traffic
Start by pulling reports on your last six months of card traffic. Your goal is to identify the exact volume and value of transactions processed by Capital One-issued cards and Discover cards, separately. Set a focus on your COF and subscription volume. This data gives you a baseline for how much revenue is immediately subject to potential disruption from the portfolio swap. Good start.
Align your engineering and finance teams
Now you’re going to want to connect with your engineering team to confirm your system’s technical ability to manage mass card portfolio swaps. Does your existing vault automatically update cards?
Once done, you’ll want your finance team to model the potential revenue loss if a significant percent of your COF volume fails due to the portfolio migration. You should probably compare that to the minor costs associated with a solution like Spreedly’s Account Updater in the Advanced Vault.
Prepare your cost and revenue model
Now you can run a side-by-side comparison of the cost to process a transaction on your current network vs the known or projected cost on the Discover network. You’ll use the data from your traffic audit to calculate the dollar value of the cost differential.
Practical tip: Focus on the difference in interchange and assessment fees, as these are the most variable and competitive parts of your processing statement.
Prioritize real-time credential management
The most valuable takeaway from this merger is probably going to be the sudden, increased need for a payment architecture that can handle the impending portfolio swap with zero downtime. Your system must prioritize real-time credential management and network flexibility.
If you have a payment system built on an Advanced Vault that incorporates an Account Updater feature to automatically manage the card migration behind the scenes, you’ll avoid focusing solely on cost savings. You’re free to prioritize revenue retention first. This technical challenge requires a service provider that can handle swaps like this in real-time.
If you’re looking for information that isn’t valuable, then look for predictions on the exact date the full transition will be complete.
Instead, focus on the infrastructure you can control today.
Time to improve your authorization and cost outcomes
You’ve done the audit and identified the threat. You’re familiar with what the potential outcomes could be, and you’ve identified the tools you need to get it done. So we might as well move on to deploying the solution, yes? Here we go.
Deploying Account Updater to control potential revenue loss
To safeguard against potential revenue loss, especially given the Discover/Capital One situation, your immediate focus is revenue retention.
The data on your COF volume should be pointing to one clear strategy: the immediate implementation of an Advanced Vault service integrated with a sophisticated Account Updater (AU) solution. This is the essential technical feature to automatically manage the Capital One card migration and keep your subscription revenue flowing.
It’s vital to recognize that not all Account Updater services are created equal. A basic AU service can't handle complex portfolio "swap cases." Spreedly’s Advanced Vault delivers its value by orchestrating multiple services to solve this problem. For instance, in a portfolio swap from Visa to Discover, querying Visa will only report the account as closed. A truly advanced AU solution automatically detects this closure signal and then queries other networks and providers to determine if the account was truly closed or was instead swapped to a new network.
By deploying this advanced, multi-network solution, you implement a resilient, set-it-and-forget-it system that will automatically capture new card details across all swap scenarios. You've done the math on the substantial revenue you stood to lose and now you have a deployment that covers all the bases.
Use the merger as leverage for better terms
Now that you know what you’re working with, you can use that to your advantage when negotiating with payment processors. Just go ahead and ask for tiered pricing that reflects that potential for lower-cost Discover/PULSE routing.
You have the data analysis on potential savings, and you can use that as your core leverage point.
Prioritize card acceptance across all channels
Shoppers love choice. When you give them equal, frictionless options to all card brands, you increase your chances of capturing that sale. Most businesses lose more than $1M a year at the checkout phase, so it’s worth doing all you can to capture every possible sale.
A smooth, omnichannel checkout experience is critical for capturing this volume, and a vault that provides lifecycle management (keeping those card credentials fresh) is key to maximizing acceptance.
Take control of your transaction routing and retention
What have we learned? That the Capital One-Discover merger is a lot more than just a headline.
You have a direct threat to your subscription revenue and a clear opportunity to take more control of your transaction costs. There’s no point in waiting for the dust to settle. Take advantage of this opportunity by using payment technology that allows you to profit from the uncertainty.
You need to route transactions based on cost and performance, and you absolutely need an Advanced Vault with Account Updater to protect your card-on-file revenue. This means you’re prepared for any future network migrations, not just this one.
Ready to architect a flexible, cost-saving payments stack that automatically protects your revenue from massive portfolio swaps? Get in touch, and we’ll show you just how easy it can be.
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