The paper explains how Capital One’s acquisition of Discover and the migration of debit transactions from Mastercard to Discover is reshaping merchant costs and operations. As shown on page 2, Discover’s three party network model operates with fewer regulatory constraints than Visa or Mastercard, potentially leading to higher interchange fees and reduced routing flexibility. Merchants may see increased costs, shifts in network mix, and risks from BIN misclassification. The document emphasizes the need for proactive actions such as monitoring network changes, optimizing least cost routing, updating dispute processes, and modeling financial impact. Overall, adapting quickly is critical to managing costs and maintaining profitability.

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