By Representative Kalan R. Haywood II
Representative Kalan R. Haywood II
The proposed merger between Capital One and Discover holds immense benefits for first-time cardholders and communities of color. The dominance of Visa and Mastercard in the credit card systems market has been a longstanding concern, with bipartisan criticism directed at these giants for capitalizing on their outsized market share. With the Department of Justice probing into Visa’s practices, it’s evident that the need for increased competition is pressing.
I represent a majority-minority district in Milwaukee and have seen firsthand how building credit is essential to building capital within the African-American community. Too many people of color have been held back because of discriminatory policies that prevent them from getting access to credit. Credit is needed for everything from being able to buy a car, take out loans for education, or start a small business. Both companies have led in the credit access space. Capital One is a leader in offering credit cards for first time card holders, allowing them to enter the credit space and have a chance to build on and improve their credit. Discover was one of the first card issuers to offer no annual fee credit cards, making it so anybody would be able to afford to build their credit, regardless of income.
On top of the two companies’ efforts in the credit access space, through this merger, Capital One stands to gain access to Discover’s extensive network of 305 million cardholders. Such a move could empower Discover to better challenge the duopoly held by Mastercard and Visa, offering a viable alternative for consumers and businesses in the payment networks market. The prospect of Discover emerging as a more formidable competitor to Visa and Mastercard holds the promise of improved bargaining power for merchants.
With stronger competition among credit card networks, small businesses could negotiate better terms for goods and services. This would be a transformative development for minority-owned enterprises, which often lack the resources to absorb higher costs, unlike their larger counterparts.
Notably, the impact of heightened competition resonates particularly strongly within minority and women-owned businesses. Historically marginalized in the marketplace, these enterprises are disproportionately affected by the lack of options and competitiveness in pricing posed by Visa and Mastercard. By fostering an environment where Discover can effectively compete with industry behemoths, this merger offers a pathway towards leveling the playing field for minority entrepreneurs.
At its core, supporting initiatives that bolster small businesses is imperative for fostering a thriving middle class. By promoting competition among credit card networks, we not only empower entrepreneurs but also fortify the economic backbone of our society. Access to competitive credit card services at favorable rates can catalyze growth, innovation, and sustainability within the small business sector, contributing to overall economic prosperity.
In light of these considerations, I lend my support to the Capital One-Discover merger and urge the Biden Administration, to recognize its potential to benefit small businesses, particularly those owned by minorities and women. Embracing competition in the credit card industry is not only prudent but essential for driving equitable economic growth and strengthening our communities. This would be a win for the people of Milwaukee and Wisconsin as a whole.
-Representative Kalan R. Haywood II