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Insights and Expertise

Capital One + That’s nearly half a billion dollars per year from redi-

recting a fraction of transactions. If Capital One shifts its
Discover: A radical entire $272.6 billion card volume to Discover's network,
here's the revenue breakdown:
rewiring of revenue • Interchange margin (1.5 percent): $4.089 billion
• Network fee savings (0.13 percent): $354 million

lion
By Tarun Singh • Chargeback alert fees (16.9M alerts at $20): $338.6 mil-
Disputed • Total annual gain: approximately $4.78 billion

hen Capital One announced its $35.3 billion That’s nearly $5 billion per year that previously lined the
acquisition of Discover, headlines focused pockets of Visa and Mastercard, now consolidated under
on scale. But beneath the surface lies a stra- Capital One’s control.
W tegic masterpiece: one of the most ambitious
revenue reallocation plays in modern banking history.This Could Capital One become the next Visa?
isn't merely growth, it's a complete rewiring of transaction If Capital One opens up Discover’s network to external
money flows. Capital One is redirecting billions away
from payment networks directly into its own ecosystem. issuers—Chase, Citi or even Chime—it could transform
from a card issuer into a card network as a platform. If it
The old model: Shared control, split revenue acquires 10 percent of total U.S. credit card purchase vol-
ume (about $10 trillion in 2024) from other issuers, $1 tril-
Under the traditional open-loop setup, Capital One is- lion would be routed through Discover rails.
sued cards, but the infrastructure was owned by Visa and
Mastercard. Verifi (Visa) and Ethoca (Mastercard) handled The U.S. card network opportunity (10 percent external is-
chargeback alerts, raking in fees every time a dispute trig- suer adoption) would result in retained interchange mar-
gered. Every swipe split revenue: a portion to Capital One, gin of 1.5 percent, or $15 billion; earned network fees of
a chunk to the networks, and fees to the dispute platforms. 0.13 percent, or $1.3 billion; and chargeback tooling, data
monetization, loyalty and lending margins from $1 billion
The new model: Close the loop, keep the margin to $3 billion. The total potential annual revenue would be
By acquiring Discover, Capital One gains a full-stack pay- $17 billion to $19.3 billion from enabling other banks to is-
ments loop. This changes everything. Now Capital One sue on Discover's rails.
can avoid paying network fees (usually 0.13 to 0.15 percent
per transaction); own the interchange, keeping the full ap- There are several other downstream effects—from trans-
proximate 1.5 percent; bypass Verifi and Ethoca, remov- action-level incentives to fraud tooling to the fees tied to
ing $20 (estimated) alert fees on every chargeback; and every dispute or refund. Each of these layers, previously
monetize transaction data directly, opening new revenue controlled by external platforms and networks, now rep-
streams such as analytics, loyalty and risk pricing. resent potential margin upside or cost efficiency under
Capital One’s roof. The real strategic value extends well
Revenue reclamation, measured in billions beyond these headline numbers.

Even a modest 10 percent migration of Capital One's card Why this matters
volume to Discover's network delivers substantial returns,
assuming the following: As merchants, issuers and regulators grow weary of Visa
• Capital One 2024 purchase volume: $272.6 billion and Mastercard's duopoly tax, Capital One’s play isn’t just
disruptive—it’s timely. This isn’t just about scale. It’s about
• Average order value: $160.90 financial architecture, about who owns the rails and who
• Chargeback rate: 1 percent profits from the friction.
• Verifi/Ethoca alert fee per dispute: $20 The foundation is being laid for a bank-powered network
• Interchange fee: approximately 1.5 percent per trans- renaissance, where value creation is no longer diluted
action across fragmented players. It sets a precedent not just for
If just 10 percent of Capital One’s 2024 card volume is rout- banks but for anyone in the fintech, BNPL or embedded
ed through Discover’s network, the revenue breakdown payments space. Watch for product launches, partner an-
with a 10 percent margin is: nouncements and merchant adoption signals. If even a
• Interchange margin (1.5 percent): $408.9 million few dominoes fall, Capital One’s closed loop could quietly
become the most lucrative open secret in payments.
• Network fee savings (0.13 percent): $35.4 million
Payments innovator and chargebacks expert Tarun Singh, leads Product
• Dispute alert fees (1.69 million alerts at $20): $33.9 at Disputed, has built products that scale, driven multimillion-dollar
million growth and created solutions now used by 10,000+ merchants. Contact
• Total annual gain: about $478 million him at Tarun@disputed.ai.
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