Anyone Who Says the Capital One–Discover Merger Will Be Good for Competition Has No Clue What They’re Talking About

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The media has been touting the same claim as the banks. And it’s dead wrong.

If you’re following the merger between Capital One and Discover, you’ve probably heard some variation of the claim that the companies are making to justify the deal: “This merger is good because it will create a real competitor to Visa and Mastercard.”are parroting the point. The implication is that we ought to disrupt the Visa/Mastercard payment processing duopoly, even if it means reducing how many options Americans have when they’re looking for a credit card.

The new Capital One–Discover has zero incentive to solve the problem of high credit card processing fees, and in fact would probably prefer to raise the processing fees.My Daughter Let It Slip That She Expects Me to Buy Her a House. What?Wall Street Journal are asserting that a Capital One–Discover merger would bolster competition between Visa and Mastercard by triggering more merchants to accept Discover. They seem to have completely missed the fact that 99 percent of U.S. merchants that accept Visa and Mastercard also alreadypercent a few years ago). Common sense would tell you Capital One is not going to lower processing fees across the board just to woo over that 1 percent of holdouts.

 

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