Capital One’s billionaire cofounder and CEO Rich Fairbank has a long history of asking investors to be patient while his biggest bets pay off. One of the largest to date came in May 2025, when he bought 40-year-old credit card company Discover for $51 billion. Today, that wager is already generating an enviable windfall from a regulatory quirk unlocked by the acquisition.
According to Truist analyst Brian Foran, the revenue gain, annualized, has reached roughly $1 billion. Most of it stems from the Durbin Amendment, a 2010 Dodd-Frank rule that regulates interchange, the fees merchants pay when consumers swipe their cards. The rule caps fees for cards issued by large banks running on Visa and Mastercard’s networks. Discover and other smaller payment networks are exempt, allowing them to charge higher fees.
After acquiring Discover, Capital One quickly shifted its debit-card processing from Mastercard to Discover. That raised average interchange fees paid by merchants by about 0.7%, according to Deutsche Bank analyst Mark DeVries. Spread across more than $100 billion in annual card purchases, that seemingly modest increase quickly becomes meaningful.
The setup has been seen as so lucrative that a set of megabanks recently discussed trying to form their own payments network to circumvent the Durbin Amendment, according to the Wall Street Journal.
Fairbank could squeeze even more revenue out of the acquisition by migrating Capital One’s credit cards onto Discover’s network. But extending that strategy to credit cards is far more complicated. One limitation: Discover’s network isn’t as widely accepted as Visa or Mastercard’s abroad. So if Capital One moved its upscale Venture X card to Discover’s network, for example, it would likely upset frequent-traveler customers who might see their cards rejected in other countries.
Another obstacle is that Discover’s own credit-card interchange rates aren’t much higher than Capital One’s. To persuade more merchants to accept its cards, Discover historically kept its fees relatively low, according to DeVries. As of 2024, its average credit-card interchange fee was about 0.2 percentage points lower than Capital One’s.
Beyond the revenue gains, Fairbank said in yesterday’s second-quarter earnings call that Capital One has already achieved roughly one-third of the deal’s expected $1.3 billion in cost savings, with the remainder expected over the next year. Altogether, Capital One projects $2.5 billion in annual benefits or “synergies” once the integration is complete.
Fairbank has made—and largely won—big bets before, Foran notes. In the early 2000s, he started spending more than $1 billion annually on marketing to build Capital One’s brand through the “What’s in your wallet?” campaign. Later came the launch of its more premium Venture card and a multiyear technology overhaul, both of which paid off.
It’s too early to say if the Discover acquisition will rank among Fairbank’s savviest moves. DeVries is skeptical it will prove as transformative as many expect, citing the limitations on migrating credit-card volume. Foran is more optimistic, arguing that owning its own payment network gives Capital One lasting advantages, from eliminating network fees to improving product innovation and fraud prevention.
Foran says the real test will be whether Capital One can lift its return on capital above 20% over the next several years, from about 17% before the Discover purchase. “That would really be where the rubber hits the road,” he says.
Investors haven’t yet bought into that thesis. Capital One shares are down 17% this year, versus a 10% gain for the S&P 500 and a 13% rise for large-bank stocks. Analysts attribute the weakness partly to concerns about middle-income consumers’ financial health and partly to the elevated expenses associated with the company’s ongoing investments.