Here's why Capital One is buying Discover in the biggest proposed merger of 2024

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Capital One's recently announced $35.3 billion acquisition of Discover Financial isn't just about getting bigger — gaining «scale» in Wall Street-speak — it's a bid to protect itself against a rising tide of fintech and regulatory threats.

It's a chess move by one of the savviest long-term thinkers in American finance, Capital One CEO Richard Fairbank. As a cofounder of a top 10 U.S. bank by assets, his tenure is a rarity in a banking world dominated by institutions like JPMorgan Chase that trace their origins to shortly after the signing of the Declaration of Independence.

Fairbank, who became a billionaire by building Capital One into a credit card giant since its 1994 IPO, is betting that buying rival card company Discover will better position the company for global payments' murky future. The industry is a dynamic web where players of all stripes — from traditional banks to fintech players and tech giants — are all seeking to stake out a corner in a market worth trillions of dollars by eating into incumbents' share amid the rapid growth of e-commerce and digital payments.

«This deal gives the company a stronger hand to battle other banks, fintechs and big tech companies,» said Sanjay Sakhrani, the veteran KBW retail finance analyst. «The more that they can separate themselves from the pack, the more they can future-proof themselves.»

The deal, if approved, enables Capital One to leapfrog JPMorgan as the biggest credit card company by loans, and solidifies its position as the third largest by purchase volume. It also adds heft to Capital One's banking operations with $109 billion in total deposits from Discover's digital bank and helps the combined entity shave $1.5 billion in expenses by 2027.

But