Unpacking the consumer impact of the Capital One and Discover deal
- The Capital One-Discover deal may be driven by the complementary attributes of their customers, potentially leading to changes in product offerings and services to better serve consumers.
- The combined entity could introduce a rewards based debit card as well as relaunch Discover's credit cards for SMBs. Beyond products however it is unlikely that the UX will change dramatically.
One of the questions surrounding the Capital One-Discover deal is how the deal will impact the product mix, CX at the incumbent institution and by extension how these changes (if any) will impact consumers.
One catalyst for the merger may be that Discover and Capital One customers have complementary attributes and would be better served by the combined entity.
Underlying synergies
Discover customers are more likely to consider Capital One as an alternative and vice versa, according to John Cabell, managing director of payments intelligence at J.D. Power.
“It is true that both companies have fewer affluent consumers than some competitors. But Discover customers are likely seeking another card with Capital One that may be a Visa/Mastercard product to ensure ubiquitous card acceptance and rich rewards, whereas Capital One customers may be seeking another product with the reputed consumer financial care offered by Discover,” he said.
Capital One customers particularly prefer the Discoverit Cashback card, and Discover customers tend to favor Capital One Platinum and Quicksilver Rewards cards more than other alternatives on the market, according to Cabell.
These complementary attributes will most likely pave the way for changes in products and services as well:
Rewards debit card
The 2010 Durbin Amendment which caps interchange fees on debit cards for large banks only applies to open networks like Visa and Mastercard and not on proprietary networks like Discover and American Express. This may allow Capital One, which plans on moving a quarter of its 100 million cardholders to the Discover network, to offer cash-back rewards on debit cards.
Moreover, Capital One may also leverage its rewards and data expertise to introduce new offerings like a rewards linked debit/credit card where customers can earn reward points that can be applied interchangeably between debit and credit purchases, according to Richard Winston, global industry lead of financial services at Slalom, a technology and business consulting company. _____________________________________________________________________ 