With news of a potential Capital One / Discover merger we have had more than a few questions about product shelf overlap and upside potential of these two brands coming together.

Beyond the obvious, here are some of the highlights from our data:

• In the cash back space, Capital One and Discover products feature in the top 5 reviewed products by U.S. consumers. To be more specific, Capital One Quicksilver ranks #1 and Discover it Cash Back ranks #5.

• While both cards receive strong feedback, they are successful for different reasons, and resonate differently with different consumer segments.

• In fact, when we look across all products offered by Capital One vs. all products offered by Discover, a few common themes prevail:

Capital One

Contrary to what some may think, Capital One rewards are not always the ‘richest’ in market.

For example, in the cash back space, there are products that offer richer rewards than Quicksilver. To name a few, Chase Freedom Unlimited couples 1.5% back on all purchases with 3% on Dining, 3% on Drugstores, and 5% on Chase Travel. Wells Fargo Active offers 2% back on every purchase.

Going all the way back in time, in their push into Prime, Capital One made a decision that competing on rewards-only is not a viable strategy for competitive differentiation and has invested heavily into developing a comprehensive array of proprietary value-added benefits.

This focus on promoting ancillary benefits that make the overall card more valuable is evident across the bank’s entire product shelf. We monitor every issuer, and every major portfolio in U.S., and Capital One consistently markets more benefits on their No Fee and Mid-Tier Annual Fee cards than any other issuer in U.S., including Chase.

Our data has also consistently shown that ~60% of U.S. Consumers are looking at non-reward benefits first as they select their card. This engagement with value-added benefits is particularly pronounced among Mass Affluent consumers giving Capital One an undeniable edge with this audience.

Discover

In contrast, Discover has a more pronounced focus on rewards and benefits that resonate with Younger and Term-Sensitive consumers.

Once again, contrary to what some may think, Discover’s reward constructs are unique and compelling.

Discover pioneered an unlimited rewards match intro offer that is highly resonant with consumers. Unlike a traditional intro offer (e.g., $200 after spending $500), Discover’s match encourages cardholders to use their card over the course of the year, minimizing gaming behavior often associated with traditional intro bonus designs.

Discover’s 5% cash back calendar also works well for consumers as the card rotates relevant categories but requires active engagement from cardholders to ensure that they are maximizing their value. (And yes, Discover imposes a spending cap on 5% earn, but the cap is generous and is more than acceptable for Younger and Mass Market consumers.)

Another element that makes Discover unique is their long-term focus on accessible customer service AND term-related benefits (e.g., 24/7 U.S. based customer service, free FICO score, paying late will not raise your APR, etc.). 

In summary, Capital One and Discover cards are successful for different reasons, with different audiences. As such, Discover cards will be complementary and additive to Capital One's suite of products.

The above summary just scratches the surface as we consider a future landscape that may combine these product shelves into a comprehensive new offering. 

What’s Next:

As always, we continue to collect consumer feedback on all payment, and payment-adjacent products in the U.S. market. With respect to Capital One and Discover, we are considering longer-term questions that will impact the entire landscape. For example, what will happen if Capital One decides to transition some of their credit cards to a Discover network?

Based on a quote from Richard Fairbank, CEO of Capital One, let’s just say we are intrigued!

“Over time, we will move a growing portion of the credit card business to the Discover network. In total, across debit and credit, we expect to add over 25 million Capital One cardholders and over $175 billion in Capital One purchase volume by 2027. This injection and volume in the network will help Discover be competitive with the leading network.”