Capital One credit card shift to Discover seen limited

Capital One's plan to shift its credit card volumes to Discover may be smaller than initially anticipated, according to Bernstein analysts. While the company originally aimed to move $175 billion in total volumes to Discover by 2027, with $70 billion from debit and $100 billion from credit, analysts believe the credit card migration's financial case is significantly different from the debit card conversion.

With credit card net interchange at around 100 basis points, Capital One expects a potential revenue increase of only 5% to 10% from the switch, making the conversion highly dependent on avoiding customer losses. The debit card migration, on the other hand, tripled Capital One's net revenue per transaction. Capital One is testing select conversions of both new and existing customers, with Mastercard serving as the network for a large portion of newly acquired credit accounts.

However, cross-border transactions and Discover's limited international acceptance pose challenges. Discover currently handles around $100 billion in front-book volumes annually, and Capital One's $660 billion credit card portfolio accounts for 10% of U.S. credit card volumes.