WILMINGTON — Capital One has secured the Delaware State Bank Commissioner’s approval for its proposed $35 billion merger with Discover Financial Services – and federal regulators are the next stop in its path to completing the deal.
There’s still many hurdles to clear, as Capital One will have to get the blessing of stockholders from both companies, the Federal Reserve System Board of Governors and the Comptroller of the Currency to finalize the deal. But the approval from the Delaware State Bank Commissioner is considered an important step forward to Capital One, according to representatives.
Capital One CEO and Chairman Richard Fairbank anticipates that the merger will be complete by 2025.
“Discover is a singular opportunity,” Fairbank told investors during a third quarter earnings call. “It will create a consumer banking and global payments platform with unique capabilities, modern technology, powerful brands, and a franchise of more than 100 million customers. It delivers compelling financial results and offers the potential to enhance competition and create significant value for merchants and customers.”
While the merger is so big it’s caused federal regulators to consider how it would impact higher fees for consumers and merchants, it would also significantly impact Delaware’s financial services sector as well. Both companies employ about 1,000 employees in the First State, although Discover has only one bank branch in Greenwood.
The deal, if approved, would also give Capital One an edge in the credit card networks, or systems that process credit card transactions between issuing banks and businesses. Visa, Mastercard and American Express networks make up 96% of credit card purchases in the United States with Visa responsible for more than half of those transactions.
Since Capital One does not have a credit card network— it issues Visa and Mastercard credit cards— the Discover acquisition would provide the chance to upgrade the business and compete against those companies. Discover’s own processing network share dropped 6% to 4% in recent times.
In recent months, federal regulators under the Biden administration have introduced new federal guidelines on such mega deals between two companies worth billions that serve millions of consumers. With those obstacles in mind, Capital One may be banking on the strength of the network aspect to break up the strong hold both Visa and Mastercard hold on the industry.
“Buying a position in an industry that is getting a tremendous amount of scrutiny for how concentrated it is,” Fairbank told investors in October. “Certainly, we are making a strong case to a regulator that obviously has shown they care a lot about competition in that marketplace that we certainly believe that this is very pro-competitive in that sense.”
In Delaware, prominent government officials like Wilmington Mayor Mike Purzycki, U.S. Sen. Chris Coons and Gov. John Carney has lent their support for the Capital One deal, writing letters to the Federal Reserve and the Office of the Comptroller of the Currency.
All letters stress the impact both Discover and Capital One have had in philanthropic efforts. For example, Carney noted that Capital One’s donation of a warehouse to the WRK Group sparked the development of the Warehouse for teens in the Riverside Community. In 2022, Capital One made a similar donation to Delaware State University, turning a building by the Wilmington Riverfront into a new education facility.
As a part of the new acquisition, Capital One has pledged more in philanthropic efforts, including $35 million in grants to Delaware’s nonprofits through 2029, likely to support continuing organizations like Stepping Stones and NeighborGood Partners that play a key role in supporting small businesses in the state.
“I am grateful for all that these two companies have done and look forward to what the combined entity can mean for Delaware. I believe the proposed acquisition will benefit our State and encourage you to consider this as you review the acquisition,” Carney wrote in July.
