The news: Capital One’s total net revenues decreased 2% to $15.2 billion, missing analysts’ target of $15.39, per CNBC.

Capital One executives attributed this slide to transition costs of the Discover network and Brex and building out travel infrastructure tech.

Diving into the card results: Onboarding Discover and Brex has shifted the composition of Capital One card portfolio.

• Credit card purchase volume increased 40% YoY to $220.540 billion (up 8% ex Discover).
• Domestic card purchase volume rose 40% YoY to $216.513 billion (3.9% ex Discover).
• Ending loan balances grew 69% YoY (3.9% ex Discover 3.9%). 

Capital One’s share of consumers with FICO scores greater than 660 for credit and domestic cards, jumping to 73%—reflecting Capital One’s credit policy changes and Discover’s pre-acquisition credit cutbacks, which CEO Richard Fairbank described as “trimming on the margins of Discover’s credit policies.”

Fairbank said that Capital One has “not seen any adverse effect in our portfolio … either in our credit or in our spend metrics,” but acknowledged that “the new conflict in the Persian Gulf represents a significant cloud on the horizon.”

What’s next? 

Discover. Capital One has already started moving credit cards onto the Discover network. Fairbank said all new Capital One cards will be issued on the Discover network by the end of Q3, with full portfolio conversion by Q1 2027 due to issues like international acceptance. Capital One is focusing its efforts on geographies that have the highest travel volume and hopes a flywheel effect propels more international merchants to accept Discover. 

In-house tech stacks. Transforming Hopper into Capital One’s in-house travel tech stack is taking first priority for build-out opportunities over its acquisition of Brex. Fairbanks wants to lean into the “vertical impact” of the bank’s new travel app. However, he added that upfront costs of these integrations would drag on net revenues in the short term.

Implications for payment platforms: Lower credit-quality customers are getting stranded from accessing lines of credit, which Fairbanks said was as essential as “fire and electricity” for everyday life. 

As one of the issuers most likely to service these consumers pulls back, fintechs have an opportunity to make inroads with these communities.