In what could be one of the biggest acquisitions of the decade, Capital One recently announced it wants to buy Discover Financial in a deal valued at more than $35 billion.
If regulators approve the deal, it will combine two of the largest U.S. credit card issuers to create a global payments platform with 70 million merchant acceptance points and a presence in more than 200 countries and territories. It turns out. Furthermore, with this acquisition, capital one Alongside major card companies Visa, Mastercard, and American Express.
But it’s not just Capital One. Discover Shareholders who stand to benefit from this transaction. PYMNTS: writes: “Combining the two credit card giants will pave the way to create a banking giant with special expertise serving paycheck-to-paycheck consumers.”
And the paycheck-to-paycheck consumer segment is a scary demographic.
According to the December 2023 edition of The New Reality Check: The Paycheck-to-Paycheck Report, 62% of consumers say they live paycheck to paycheck.
The PYMNTS Intelligence report, based on a survey of 3,252 U.S. consumers and years of historical data, provides a unique and detailed perspective on the financial balance that many Americans must negotiate. I am.
First of all, living paycheck to paycheck is a status that applies to different income groups. According to the report, 77% of respondents with annual incomes of less than $50,000 defined themselves as “consumers living paycheck to paycheck,” while 77% of respondents with annual incomes of $50,000 to $100,000 defined themselves as “consumers living paycheck to paycheck.” 67% of people say they live paycheck to paycheck. Even people making six-figure incomes are not immune. 45% of people earning more than $100,000 a year report their living wage as a function of their salary.
In total, nearly 20% of consumers who receive a paycheck say they are struggling with their bills. However, the report shows that most consumers are diligent about managing their credit despite their economic circumstances.
And this is why the potential acquisition of Discover by Capital One could prove beneficial for both the two financial powerhouses and consumers.
As previously mentioned, Capital One and Discover both have a long history of working with paycheck-to-paycheck consumers, and the Paycheck-to-Paycheck Report found that nearly 60% of all credit cards are paid by paycheck-to-paycheck consumers. We found that these are owned by consumers who live up to.
However, despite the easy access to money with credit cards, PYMNTS Intelligence uncovered various data points that show that most consumers receiving a paycheck are financially responsible.
First, 40% of payday consumers with a credit card “have no problem paying their bills.” The report also found that every time consumers receive a paycheck, they are more likely to reach for a debit card instead of a credit card to make daily purchases.
Additionally, 40% of consumers earn and maintain a super-prime credit score (720 or higher) with every paycheck, making their commitment to maintaining a solid credit score despite financial obstacles. is showing.
And about 4 in 5 of all consumers consider their credit score very or extremely important, as do consumers on every pay check. 77% of those who have no trouble paying their bills each month consider their credit score to be very important. 73% of those who said they had trouble meeting their monthly financial obligations also said their credit score was very or very important to them.
Such findings may explain one key motivation behind Capital One’s takeover bid. As PYMNTS recently noted, paycheck-to-paycheck consumers are “not typically targeted by the largest banks (or…the largest card issuers).” Given its reputation, Capital One could be betting on appealing to a large consumer base that is clearly keen on improving the health of financial institutions.
