What Does the Capital One-Discover Deal Mean for Visa and Mastercard Investors?
On Feb. 19, Capital One (NYSE: COF) announced it would acquire Discover Financial Services (NYSE: DFS) in an all-stock transaction valued at over $35 billion. The move could make Capital One the largest credit card issuer in the U.S. and create greater competition for (NYSE: V) and Mastercard (NYSE: MA), whose stocks fell following the news announcement. Here's what it could mean for investors in those companies.
Capital One provides its customers with various financial and banking services and is the ninth-largest bank in the U.S. The company's bread-and-butter business is issuing branded cards through Visa and Mastercard. It's the fourth-largest card issuer in the U.S., according to The Nilson Report.
This deal is turning a lot of heads, and for good reason. Capital One issues debit and credit cards through Mastercard and Visa, with its transactions running through their networks and earning them fees on every swipe. Meanwhile, Capital One holds on to this credit card debt and services these loans. The merger could make Capital One the largest credit card lender in the U.S., pushing it ahead of JPMorgan Chase, which currently holds that title.
Source Fool.com
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