Capital One begins testing credit card use on Discover network
The bank is assessing whether to route Capital One credit cards over Discover’s network as integration work, technology spending and AI investment continue.
By Rafael Ortiz · Fintech Correspondent
· 3 min read
Capital One is testing whether Capital One-branded credit cards can run on the Discover network, a step that could extend network-related benefits beyond debit cards as the bank integrates Discover. The update came alongside second-quarter figures showing credit card purchase volume of $253.8 billion, up 15% from the previous quarter and 26% from a year earlier, according to Capital One’s results released Tuesday.
The annual comparison includes Discover for only part of the second quarter of 2025. Capital One said legacy Discover purchase volume rose by just under 2% from a year earlier, while purchase volume across legacy Capital One businesses, including Brex and the corporate card operation moved from commercial banking, increased about 14%. Management attributed most of that gain to underlying organic growth.
Loan growth was less pronounced than card spending. Capital One reported that legacy Discover card loans fell 1.5% from a year earlier, while ending loans excluding Discover rose about 5.3%.
Capital One shares were up 0.2% in after-hours trading Tuesday.
Credit card tests follow debit conversion
Capital One said it has finished moving its debit cards to the Discover network. The second quarter included a full-quarter contribution from the associated debit revenue synergies, while Global Payment Network transaction volume reached about $190 billion, up roughly 9% from the prior quarter.
The bank is now assessing credit card volume on the network. Chairman and Chief Executive Richard Fairbank told analysts that Capital One is testing both newly originated legacy Capital One-branded accounts on Discover’s network and the conversion of existing Capital One accounts to that network.
Fairbank said Capital One has not set the amount of credit card volume it may move or the timing of any broader shift. He said the bank will decide after reviewing the results of the tests.
The mechanism is central to the integration. A card network connects merchants, banks and cardholders, setting the rails over which transactions are authorized, cleared and settled. Moving card volume onto Discover’s network could increase transaction activity on that network, but acceptance levels remain a practical constraint.
Capital One said it is working on remaining U.S. acceptance gaps and seeking broader international acceptance. Fairbank identified Mexico, the Caribbean, Canada and the United Kingdom as the four most significant international destinations for the bank’s customers.
Integration costs and credit trends
Capital One is carrying out the Discover integration while continuing to spend on technology infrastructure and artificial intelligence. Domestic card non-interest expense rose 38% year over year, which the company attributed to the addition of Discover and ongoing technology investment.
Management commentary on the earnings call indicated that Capital One has captured about one-third of the operating-expense synergies it previously announced for Discover. The bank expects to achieve the remainder by the second half of 2027.
Fairbank said Discover remains in what Capital One has described as a “brownout” for loan growth during the integration period. He said that constraint is expected to persist for some time, though Capital One sees opportunities to lift Discover growth after the technology integration is complete.
Credit metrics in the domestic card business improved during the quarter. The net charge-off rate was 4.71%, down from 5.05% in the first quarter and 5.20% a year earlier. The delinquency rate at the end of June was 3.39%, a decline of 31 basis points from the prior quarter and 21 basis points from a year earlier.
Capital One also released $662 million from its allowance for credit losses. Chief Financial Officer Andrew Young said the domestic card allowance reduction reflected “continued favorable observed credit in the quarter” and a modest reduction in the weight assigned to economic uncertainty.
Fairbank said consumer spending growth reflected both more accounts and steady increases in spend per customer. He also said payment rates remained well above pre-pandemic levels across customer segments, helping restrain loan balance growth while supporting credit performance.
This story draws on original reporting from PYMNTS.
