Capital One wrestles with how to best use Discover’s network

• Key insight: Capital One Financial faces a tricky calculus as it seeks to maximize the returns it reaps from owning the Discover payments network. 
• Expert quote: “I don’t know if I’ve seen a more scale-sensitive business than this one.” — Capital One CEO Richard Fairbank

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Capital One Financial offered fresh insights Tuesday into its strategy for taking greater advantage of the payments network it gained from its May 2025 acquisition of Discover Financial Services.

But CEO Richard Fairbank did not commit to a timeline for fully capitalizing on the investment, which he has previously said will be “measured in a whole bunch of years.”

During Capital One’s third-quarter earnings call, Fairbank spoke about enhancing international acceptance of credit cards that bear the Discover logo, and about bolstering Discover’s brand.

He said Capital One plans to increase the payments volume on the Discover network by originating Capital One credit cards that use the Discover rails. And he noted that Capital One has been conducting tests to determine which of its existing credit-card customers will be moved to the Discover network, and when.

“Capital One brings the opportunity to build more scale in a very scale-sensitive business,” Fairbank told analysts, referring to the Discover network. “I don’t know if I’ve seen a more scale-sensitive business than this one.”

The question of how much of Capital One’s credit-card business will wind up on the Discover network, and how quickly, has loomed over the acquisition. The answer will go a long way toward determining how lucrative the purchase, which closed in May 2025, turns out to be.

Capital One faces a tricky calculus as it seeks to maximize returns from a business that Fairbank has called “the holy grail.”

If the McLean, Virginia-based company switches customers who travel internationally to the Discover network before it’s able to boost Discover acceptance among overseas merchants, those cardholders could grow frustrated and switch to another issuer.

The $673 billion-asset company has previously said that it plans to add over $175 billion of Capital One purchase volume to the Discover network by 2027, across both credit cards and debit cards. Migrating the latter cards to the Discover network posed less of a risk to Capital One than the credit-card switchover, and that process has already been completed.

Over the last four quarters in Capital One’s credit-card business, purchase volume topped $950 billion, highlighting the size of the challenge as Capital One seeks to take full advantage of the economics that can come from simultaneously issuing the card and owning the network.

“This is not going to be a big-bang thing like you saw on the debit side,” Fairbank told analysts Tuesday.

Still, Fairbank argued that the combined earnings strength of Capital One and Discover is now in view.

“We have talked for a while now about the earnings power on the other side of integration. You can squint your eyes and see it now in the first three quarters of 2026,” Fairbank said.

He explained that in order to see the company’s combined earnings, it’d be necessary to normalize for the sizable allowance release Capital One has had in 2026, and for the increased marketing spending it expects to report in the fourth quarter.

He also advised analysts to take into account the remaining synergies Capital One expects to accrue from the Discover deal, as well as the interchange revenue it expects to lose as a result of a pending settlement in litigation involving Visa and Mastercard. Those last two factors should roughly offset each other, Fairbank said.

The quarterly results announced Tuesday were the first that allowed for a year-over-year comparison with a full three-month period in 2025 after Discover had been absorbed into Capital One.

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During the third quarter, Capital One reported net income of $3.5 billion, up from $3.2 billion in the third quarter of 2025. Earnings per share of $5.61 easily beat the $4.66 consensus estimate of analysts, as reported by S&P Capital IQ.

The quarterly results included acquisition amortization expenses, as well as expenses related to the integrations of Discover and the fintech Brex, which Capital One acquired in April. Combined, those adjusting items took a $1.08 bite out of earnings per share.

Total net revenue of $16.3 billion was up 6% from the same period a year earlier. Noninterest expenses rose 7% from the third quarter of 2025.