Capital One is making a splash coming out of Presidents Day with an announcement that it has agreed to acquire Discover in an all-stock deal. Both banks offer a compelling set of products and rewards to their customers. If the acquisition goes through, it could provide a significant expansion of benefits and services for both sets of customers.

Capital One is acquiring Discover in an all-stock deal that represents a premium of 26.6% over Discover’s closing price of $110.49 on Feb. 16. At this price, the transaction is valued at $35.3 billion. Each Discover shareholder will receive 1.0192 shares of Capital One stock for each share of Discover stock.

The deal, which must be approved by federal regulators, is expected to close in late 2024 or early 2025. At the close of the transaction, Capital One shareholders will own approximately 60% of the combined company, while Discover shareholders will own the other 40%.

While there is overlap between the two banks in consumer credit cards, this acquisition would broaden the number of products available to both sets of customers. Here’s a high-level overview of the products they offer.

Although Capital One has 259 branches, Discover is primarily a digital-first bank with a single physical location. This acquisition will provide additional opportunities for Discover customers to transact business in person.

With the acquisition of Discover by Capital One, there could be major changes ahead for credit card customers. Here are a few changes that might occur.

Capital One credit cards are either Visa or Mastercard, while Discover operates its own credit card processing network. Capital One is expected to reduce costs by $1.2 billion by shifting its debit card volume and selected credit card volume to the Discover network.

It is unclear whether Capital One will convert some of its current credit cards to the Discover network or if it plans to introduce new credit cards with the Discover logo.

While Discover is accepted at 99% of the merchants that accept Visa and Mastercard within the U.S., Discover doesn’t have the same acceptance rate internationally.

Capital One has spent the last several years building out its credit card loyalty program. Venture Miles introduced transfer partners in December 2018, and it has added additional airline and hotel loyalty programs since then.

Discover cards typically earn cash back rewards or the bank’s proprietary rewards that can be redeemed for travel. Capital One could merge the Discover it Miles program into its Venture Miles rewards for enhanced volume and negotiating leverage with the airlines and hotels. This could unlock tremendous value and flexibility for Discover it Miles cardholders, including the ability to redeem rewards for travel through Capital One Travel.

Discover and Capital One are two of the major credit card issuers that cater to consumers and small businesses with subprime credit. These customers may be rebuilding their credit after past mistakes, or they may have limited credit history and are working to establish good credit. With the acquisition of Discover by Capital One, bank regulators may be concerned about the possible reduction of credit options for those seeking secured cards or cards catering to those with fair credit. Management may need to address this concern to ensure the acquisition isn’t opposed by regulators.

When the integration is completed, both sets of customers will gain access to a wider array of banking products and services. The banking and lending products of Capital One and Discover primarily overlap in consumer banking and credit cards. Capital One offers auto loans and business banking products, while Discover provides mortgage refinancing, home equity loans and CDs. With an expanded portfolio of products, customers could handle more of their banking needs at Capital One rather than seeking out a different bank. Additionally, Discover customers would have access to Capital One’s branches for in-person transactions.