WEBVTT 00:00:00.000 --> 00:00:04.599 Okay, let's unpack this. Welcome back to The 00:00:04.599 --> 00:00:07.120 Deep Dive, the show where we take a whole stack 00:00:07.120 --> 00:00:10.300 of sources, articles, research, internal notes, 00:00:10.400 --> 00:00:13.140 and really distill them down so you can get informed. 00:00:13.599 --> 00:00:16.579 Fast. Today, we are opening that metaphorical 00:00:16.579 --> 00:00:19.500 wallet and looking inside. Well, one of the most 00:00:19.500 --> 00:00:22.399 recognizable names in American finance, Capital 00:00:22.399 --> 00:00:25.059 One. Everyone knows the slogan, right? What's 00:00:25.059 --> 00:00:28.079 in your wallet? Oh, yeah. But the story behind 00:00:28.079 --> 00:00:30.120 the company, I mean, how it went from this really 00:00:30.120 --> 00:00:33.500 radical data driven startup in the 90s to the 00:00:33.500 --> 00:00:37.000 banking titan it is today. It's just a masterclass 00:00:37.000 --> 00:00:39.899 in disruption and frankly, in risk. And that's 00:00:39.899 --> 00:00:41.579 really our mission for this deep dive. We're 00:00:41.579 --> 00:00:43.439 going to trace the entire evolution. of Capital 00:00:43.439 --> 00:00:46.340 One. We'll start with its almost algorithmic 00:00:46.340 --> 00:00:48.679 foundation built on statistical modeling. And 00:00:48.679 --> 00:00:50.320 then we'll move through this relentless series 00:00:50.320 --> 00:00:52.659 of acquisitions that turned it into a diversified 00:00:52.659 --> 00:00:55.299 bank right up to its, well, its recent mega merger. 00:00:55.479 --> 00:00:57.640 If you connect this to the bigger picture, we 00:00:57.640 --> 00:01:00.439 are looking at a, I mean, a highly complex entity. 00:01:00.799 --> 00:01:03.520 Absolutely. The sources we have. updated to June 00:01:03.520 --> 00:01:06.459 2025, put it as the sixth largest bank in the 00:01:06.459 --> 00:01:08.980 U .S. by total assets. That's a staggering amount 00:01:08.980 --> 00:01:10.920 of influence. And just to lay the groundwork 00:01:10.920 --> 00:01:13.459 for you, the company is headquartered in Tysons, 00:01:13.459 --> 00:01:16.469 Virginia. It was officially founded on July 21st, 00:01:16.469 --> 00:01:19.790 1994, by Richard Fairbank. Who is still the chairman, 00:01:19.870 --> 00:01:22.629 president, and CEO today, which is remarkable. 00:01:22.950 --> 00:01:24.829 And Nigel Morris. And when we talk scale, we're 00:01:24.829 --> 00:01:30.569 talking about $478 .464 billion in total assets 00:01:30.569 --> 00:01:35.090 back in 2023. About 52 ,000 employees. It's number 00:01:35.090 --> 00:01:38.370 82 on the Fortune 500. But to really get how 00:01:38.370 --> 00:01:40.810 this giant was built, you have to go back to 00:01:40.810 --> 00:01:43.150 that moment, that initial spark, when Fairbank 00:01:43.150 --> 00:01:45.900 and Morris. realized that that information, that 00:01:45.900 --> 00:01:48.000 was the new currency of banking. That's the key 00:01:48.000 --> 00:01:50.239 right there. This first phase is just so crucial. 00:01:50.319 --> 00:01:52.579 It explains exactly how Capital One managed to 00:01:52.579 --> 00:01:54.920 beat all the established players. It wasn't about 00:01:54.920 --> 00:01:56.859 having deeper pockets. No, not at all. It was 00:01:56.859 --> 00:01:59.099 about having better information. And what's fascinating 00:01:59.099 --> 00:02:01.019 here is that the core innovation wasn't really 00:02:01.019 --> 00:02:03.239 a financial product. It was a method. A way of 00:02:03.239 --> 00:02:06.439 thinking. Exactly. We're talking 1987. The internet 00:02:06.439 --> 00:02:08.699 hasn't really changed everything yet. And credit 00:02:08.699 --> 00:02:11.919 cards are just incredibly rigid. Right. If you 00:02:11.919 --> 00:02:14.650 qualified. You got the same deal as pretty much 00:02:14.650 --> 00:02:16.810 everyone else. Same interest rate, same annual 00:02:16.810 --> 00:02:19.590 fee. It was the definition of a one -size -fits 00:02:19.590 --> 00:02:22.530 -all model. Which means banks were leaving a 00:02:22.530 --> 00:02:24.509 ton of money on the table. They were either... 00:02:24.680 --> 00:02:28.159 overcharging people who were low risk or just 00:02:28.159 --> 00:02:30.860 completely ignoring entire segments of the market 00:02:30.860 --> 00:02:32.620 they didn't understand. And Fairbank and Morris 00:02:32.620 --> 00:02:35.560 saw that inefficiency as this massive, glaring 00:02:35.560 --> 00:02:38.560 market opportunity. Their concept was, for the 00:02:38.560 --> 00:02:40.819 time, truly radical. Just drop the flat annual 00:02:40.819 --> 00:02:43.699 fee. Just drop it. And instead use massive data 00:02:43.699 --> 00:02:45.900 compilation and, you know, these sophisticated 00:02:45.900 --> 00:02:47.979 statistical models, what they called test and 00:02:47.979 --> 00:02:50.520 learn, to completely customize the credit card 00:02:50.520 --> 00:02:52.819 offers. So tailoring everything, the rates, the 00:02:52.819 --> 00:02:55.860 fees, the limits. Everything. For hundreds and 00:02:55.860 --> 00:02:58.659 then eventually thousands of very specific customer 00:02:58.659 --> 00:03:01.139 segments that they identified using all this 00:03:01.139 --> 00:03:03.699 data. So they were essentially building a credit 00:03:03.699 --> 00:03:06.139 card strategy on top of what was basically a 00:03:06.139 --> 00:03:09.039 tech and data operation. Yes. The source would 00:03:09.039 --> 00:03:10.759 make a big point of this. They were consulting 00:03:10.759 --> 00:03:13.400 with major tech players like Oracle Corporation 00:03:13.400 --> 00:03:15.900 very early on. To figure out how to manage all 00:03:15.900 --> 00:03:17.919 this data. Exactly. How to compile it, manage 00:03:17.919 --> 00:03:19.479 it, and then actually use it. This wasn't just 00:03:19.479 --> 00:03:22.780 marketing. It was blending marketing. credit, 00:03:22.939 --> 00:03:27.340 risk modeling, and tech all into one single decision 00:03:27.340 --> 00:03:30.259 -making machine. And that super analytical fine 00:03:30.259 --> 00:03:33.389 -tuned approach Let them identify risk with a 00:03:33.389 --> 00:03:36.389 kind of granularity their competitors just couldn't 00:03:36.389 --> 00:03:38.650 imagine. They knew exactly how much risk they 00:03:38.650 --> 00:03:40.610 were taking on. With one group, they offered 00:03:40.610 --> 00:03:44.789 a 19 .9 % APR2 versus another they offered 9 00:03:44.789 --> 00:03:48.150 .9%. And that precision gave them this huge competitive 00:03:48.150 --> 00:03:51.409 edge. They could price risk so finely that they 00:03:51.409 --> 00:03:53.550 could attract high -risk, high -margin customers 00:03:53.550 --> 00:03:55.889 that other banks wouldn't touch. While still 00:03:55.889 --> 00:03:57.949 staying profitable. And this is where that idea 00:03:57.949 --> 00:04:00.430 of the data strategy mitigating their monoline 00:04:00.430 --> 00:04:02.580 risk becomes... so important. Explain that term 00:04:02.580 --> 00:04:04.699 monoline. It just means all your revenue comes 00:04:04.699 --> 00:04:06.879 from a single product. For them, it was credit 00:04:06.879 --> 00:04:09.219 cards. And that's inherently risky, right? If 00:04:09.219 --> 00:04:11.180 the market turns or if interest rates shoot up, 00:04:11.280 --> 00:04:14.080 your entire business is exposed. But their data 00:04:14.080 --> 00:04:16.399 strategy was their hedge. It was their hedge. 00:04:16.560 --> 00:04:18.740 It allowed them to manage that risk internally 00:04:18.740 --> 00:04:20.920 because they were diversifying their portfolio 00:04:20.920 --> 00:04:23.720 within the credit card space. By understanding 00:04:23.720 --> 00:04:25.800 thousands of these little customer segments, 00:04:26.100 --> 00:04:28.860 they didn't just have one big block of risk. 00:04:29.120 --> 00:04:33.649 They had. hundreds of distinct individually priced, 00:04:34.009 --> 00:04:37.290 manageable little blocks of risk. Precisely. 00:04:37.350 --> 00:04:40.170 And that segmentation insulated them far better 00:04:40.170 --> 00:04:42.129 than any of their traditional competitors who 00:04:42.129 --> 00:04:44.230 were just offering a few standard cards. The 00:04:44.230 --> 00:04:46.250 launch pad for this whole thing was Cigna Bank. 00:04:46.430 --> 00:04:49.310 Right. In Richmond, Virginia. It's now part of 00:04:49.310 --> 00:04:52.449 Wells Fargo, actually. But back in 1988, Fairbank 00:04:52.449 --> 00:04:54.970 and Morris convinced them to start a new credit 00:04:54.970 --> 00:04:57.350 card division using this analytical approach. 00:04:57.550 --> 00:05:01.069 And it worked fast. The success was undeniable. 00:05:01.639 --> 00:05:02.839 And here's where it gets really interesting. 00:05:03.660 --> 00:05:07.839 their 1991 mass mailing campaign. It was revolutionary. 00:05:08.240 --> 00:05:10.759 They didn't just send out applications. No. They 00:05:10.759 --> 00:05:12.680 offered to transfer your existing credit card 00:05:12.680 --> 00:05:15.980 balances from other PACs in exchange for a lower 00:05:15.980 --> 00:05:19.019 introductory interest rate. And the volume they 00:05:19.019 --> 00:05:21.959 got, driven by that targeted data modeling, just 00:05:21.959 --> 00:05:24.459 proved the immense power of their strategy. Which 00:05:24.459 --> 00:05:26.899 made the spinoff pretty much inevitable. It had 00:05:26.899 --> 00:05:31.600 to happen. On July 21, 1994, Cignet spun off 00:05:31.600 --> 00:05:34.379 the division. It was... first called Oakstone 00:05:34.379 --> 00:05:36.660 Financial. Which is a name I've never heard before. 00:05:36.899 --> 00:05:39.220 It didn't last long. They renamed it Capital 00:05:39.220 --> 00:05:42.779 One in October of 94 with Fairbank as CEO. And 00:05:42.779 --> 00:05:45.160 the whole thing was completed by February 1995. 00:05:46.079 --> 00:05:48.459 So for those first few years, Capital One was 00:05:48.459 --> 00:05:51.529 the definition of a monoline bank. all revenue 00:05:51.529 --> 00:05:53.769 from credit cards. But because they were constantly 00:05:53.769 --> 00:05:55.949 testing hundreds of thousands of different credit 00:05:55.949 --> 00:05:57.949 terms out in the market, they were constantly 00:05:57.949 --> 00:06:00.189 generating data. And that data was their real 00:06:00.189 --> 00:06:02.589 asset. It let them adjust to market shifts way 00:06:02.589 --> 00:06:05.209 faster than anyone else. That initial confidence, 00:06:05.370 --> 00:06:07.310 which is all built on data, is what propelled 00:06:07.310 --> 00:06:09.589 them out of that monoline structure. It had to. 00:06:09.750 --> 00:06:13.370 By 1996, the credit card market was getting super 00:06:13.370 --> 00:06:16.089 competitive. And, you know, Capital One's own 00:06:16.089 --> 00:06:18.870 success had spawned a bunch of imitators. They 00:06:18.870 --> 00:06:20.910 couldn't just rely on those teaser rates anymore. 00:06:21.209 --> 00:06:23.550 So keeping customers became the new priority. 00:06:23.810 --> 00:06:26.029 Paramount. They started offering new things like 00:06:26.029 --> 00:06:28.610 co -branded cards, you know, the ones tied to 00:06:28.610 --> 00:06:31.430 retailers or airline secured cards for people 00:06:31.430 --> 00:06:33.649 building credit and joint account cards, all 00:06:33.649 --> 00:06:36.069 to maintain loyalty. But the really big shift 00:06:36.069 --> 00:06:39.430 was moving into totally new. product lines in 00:06:39.430 --> 00:06:42.470 new countries. In 1996, they took that data model 00:06:42.470 --> 00:06:45.569 global. They launched in the UK and Canada, which 00:06:45.569 --> 00:06:48.389 immediately gave them a much bigger pool of consumer 00:06:48.389 --> 00:06:50.410 data to work with. And then domestically, they 00:06:50.410 --> 00:06:53.490 made this critical leap into auto loans. This 00:06:53.490 --> 00:06:57.230 was huge. In mid 1996, they got federal approval 00:06:57.230 --> 00:07:00.290 to set up Capital One FSB. And this was a major 00:07:00.290 --> 00:07:02.370 regulatory win because it meant they could operate 00:07:02.370 --> 00:07:04.269 as a thrift institution. Which allowed them to 00:07:04.269 --> 00:07:06.310 do what exactly? It allowed them to hold on to 00:07:06.310 --> 00:07:08.740 deposits from their secured cards and most importantly, 00:07:08.860 --> 00:07:11.600 start issuing automobile installment loans. This 00:07:11.600 --> 00:07:13.860 was their first real step away from being just 00:07:13.860 --> 00:07:16.079 a credit card company. And they didn't just build 00:07:16.079 --> 00:07:18.319 this division from scratch. They bought it. Oh, 00:07:18.339 --> 00:07:20.699 yeah. They executed a classic roll up strategy. 00:07:20.959 --> 00:07:23.420 The sources lay it out clearly. They bought Summit 00:07:23.420 --> 00:07:25.680 Acceptance Corporation in 98, then People First 00:07:25.680 --> 00:07:28.339 Finance in 2001. And those two became Capital 00:07:28.339 --> 00:07:31.040 One Auto Finance. Right, in 2003. And then they 00:07:31.040 --> 00:07:33.519 capped it off by buying Onyx Acceptance Corporation 00:07:33.519 --> 00:07:36.879 in 2005. It was a very clear, deliberate plan. 00:07:37.610 --> 00:07:41.009 by the expertise, by the infrastructure and by 00:07:41.009 --> 00:07:43.649 the customer base to become a major player in 00:07:43.649 --> 00:07:46.470 auto lending fast. That pace of acquisition, 00:07:46.709 --> 00:07:50.129 it really signaled a much deeper ambition. It 00:07:50.129 --> 00:07:52.910 did. The biggest pivot came starting in 2005 00:07:52.910 --> 00:07:55.449 when they decided to enter full scale retail 00:07:55.449 --> 00:07:57.949 banking. This was the move that changed them 00:07:57.949 --> 00:08:00.949 from a specialized lender into a true bank holding 00:08:00.949 --> 00:08:03.470 company. And that completely changed their regulatory 00:08:03.470 --> 00:08:05.910 world and just how complex their operations were. 00:08:06.050 --> 00:08:08.990 The whole shift started in 2005. Capital One 00:08:08.990 --> 00:08:11.490 became the first monoline credit card issuer 00:08:11.490 --> 00:08:14.629 ever to acquire a full service bank. They bought 00:08:14.629 --> 00:08:17.069 the New Orleans -based Hibernia National Bank 00:08:17.069 --> 00:08:21.189 for $4 .9 billion. So what did Hibernia give 00:08:21.189 --> 00:08:23.430 them that they didn't have? A strong, stable 00:08:23.430 --> 00:08:25.860 base of deposits, especially in the Gulf. South 00:08:25.860 --> 00:08:28.500 region. And that's crucial for funding your lending 00:08:28.500 --> 00:08:30.720 operations without having to rely on the more 00:08:30.720 --> 00:08:34.620 volatile wholesale money markets. Then in 2006 00:08:34.620 --> 00:08:38.659 came the North Fork Bank acquisition for a massive 00:08:38.659 --> 00:08:43.000 $13 .2 billion. That was pivotal. Hugely pivotal. 00:08:43.100 --> 00:08:45.500 North Fork was strategic because it massively 00:08:45.500 --> 00:08:48.440 expanded their deposit base and gave them this 00:08:48.440 --> 00:08:51.179 crucial footprint in the very lucrative, very 00:08:51.179 --> 00:08:53.580 affluent Northeast market, especially around 00:08:53.580 --> 00:08:56.620 New York. So that deal really reduced their dependency 00:08:56.620 --> 00:08:58.980 on the credit card business. Profoundly. It gave 00:08:58.980 --> 00:09:01.740 them this deep, diverse base of customer deposits. 00:09:02.139 --> 00:09:04.419 And they kept going, buying Chevy Chase Bank 00:09:04.419 --> 00:09:08.559 in 2009 for $520 million to solidify that regional 00:09:08.559 --> 00:09:10.799 presence even more. But when you pursue scale 00:09:10.799 --> 00:09:12.759 that fast, you're going to create some friction. 00:09:12.899 --> 00:09:14.879 And we have to pause here for what the sources 00:09:14.879 --> 00:09:16.960 call the mortgage crisis interlude. That's right. 00:09:17.039 --> 00:09:19.539 Because tucked inside that huge North Fork deal 00:09:19.539 --> 00:09:22.240 in 2006 was a company called Greenport Mortgage. 00:09:22.340 --> 00:09:23.809 And they quickly found themselves exposed. to 00:09:23.809 --> 00:09:26.409 the collapsing housing market. They did. Investor 00:09:26.409 --> 00:09:28.610 pressure was mounting. And by 2007, right at 00:09:28.610 --> 00:09:31.149 the peak of the subprime crisis, Capital One 00:09:31.149 --> 00:09:34.049 just closed the Greenpoint unit completely. Painful 00:09:34.049 --> 00:09:37.429 exit. Very painful. It cut 1 ,900 jobs and cost 00:09:37.429 --> 00:09:41.389 them $860 million in charges. A very expensive 00:09:41.389 --> 00:09:43.649 lesson in the volatility of the mortgage business. 00:09:43.970 --> 00:09:45.990 And while they were dealing with that, the broader 00:09:45.990 --> 00:09:48.970 financial crisis hit. So in 2008, like a lot 00:09:48.970 --> 00:09:50.909 of banks, they got a big investment from the 00:09:50.909 --> 00:09:54.440 U .S. Treasury. They did. $3 .56 billion via 00:09:54.440 --> 00:09:56.940 TARP, the Troubled Asset Relief Program. But 00:09:56.940 --> 00:09:58.980 they moved fast to pay that back. Very fast. 00:09:59.220 --> 00:10:01.879 They fully repaid it by June 2009 and actually 00:10:01.879 --> 00:10:04.500 made a profit of over $100 million for the Treasury 00:10:04.500 --> 00:10:07.090 in the process. But the scrutiny didn't just 00:10:07.090 --> 00:10:10.649 go away. No. There's a note here that in 2013, 00:10:10.929 --> 00:10:13.850 the company settled with the SEC for $3 .5 million 00:10:13.850 --> 00:10:16.929 over claims that they had understated their auto 00:10:16.929 --> 00:10:19.610 loan losses during that whole 2008 crisis period. 00:10:19.830 --> 00:10:21.590 Which just goes to show that even their famous 00:10:21.590 --> 00:10:24.070 data modeling wasn't totally immune to the kind 00:10:24.070 --> 00:10:26.110 of systemic shock we saw in the recession. So 00:10:26.110 --> 00:10:28.690 despite that really painful exit from the mortgage 00:10:28.690 --> 00:10:31.370 business, they didn't stay away from big deals 00:10:31.370 --> 00:10:34.610 for long. Just a few years later, 2012, they 00:10:34.610 --> 00:10:37.039 come back with... the $9 billion acquisition 00:10:37.039 --> 00:10:40.159 of ING Direct USA. And this was their biggest 00:10:40.159 --> 00:10:42.679 single step back into the savings and mortgage 00:10:42.679 --> 00:10:45.019 market. And it kicked up a major controversy. 00:10:45.440 --> 00:10:47.919 What's so fascinating here is that the ING deal 00:10:47.919 --> 00:10:51.299 wasn't just business. It became a political flashpoint. 00:10:51.480 --> 00:10:54.659 The sheer size of it, $9 billion in cash and 00:10:54.659 --> 00:10:57.399 stock, triggered intense regulatory scrutiny. 00:10:57.639 --> 00:10:59.720 Specifically around the brand new Dodd -Frank 00:10:59.720 --> 00:11:02.340 Act. Right. So why this deal in particular? What 00:11:02.340 --> 00:11:04.500 was the big worry? It was the too big to fail. 00:11:04.559 --> 00:11:07.159 clause. Dodd -Frank was designed to prevent any 00:11:07.159 --> 00:11:09.600 single bank from becoming so critical that its 00:11:09.600 --> 00:11:11.840 failure could tank the whole system. And critics 00:11:11.840 --> 00:11:13.840 were saying this acquisition pushed Capital One 00:11:13.840 --> 00:11:17.100 too close to that line. Exactly. A powerful coalition 00:11:17.100 --> 00:11:19.659 of civil rights groups, consumer advocates and 00:11:19.659 --> 00:11:22.120 even Representative Barney Frank himself argued 00:11:22.120 --> 00:11:24.639 that this deal had to be held to the new rigorous 00:11:24.639 --> 00:11:27.480 standards of Dodd -Frank. So their argument was 00:11:27.480 --> 00:11:29.399 that Capital One had to prove that the public 00:11:29.399 --> 00:11:32.080 benefit of the merger was greater than the new 00:11:32.080 --> 00:11:35.649 systemic risk it created. Overwhelming. It was 00:11:35.649 --> 00:11:37.870 a fundamental shift in how regulators had to 00:11:37.870 --> 00:11:40.389 think. It wasn't just, is this deal financially 00:11:40.389 --> 00:11:43.710 sound anymore? It was, does this deal risk the 00:11:43.710 --> 00:11:46.690 entire global economy? A true stress test for 00:11:46.690 --> 00:11:49.590 that new post -crisis regulatory world. It really 00:11:49.590 --> 00:11:52.149 was. And despite all that pushback, regulators 00:11:52.149 --> 00:11:54.789 did ultimately approve the deal in February 2012. 00:11:55.230 --> 00:11:57.710 ING Direct, which was known for its popular online 00:11:57.710 --> 00:12:00.190 savings accounts, was rebranded as Capital One 00:12:00.190 --> 00:12:03.110 360 later that year. And that deal didn't just 00:12:03.110 --> 00:12:06.289 add assets. No, it gave Capital One this massive 00:12:06.289 --> 00:12:09.049 stable base of digitally savvy savers, which 00:12:09.049 --> 00:12:11.409 just reinforced their whole tech forward identity. 00:12:11.769 --> 00:12:14.850 And just to close the loop on mortgages, the 00:12:14.850 --> 00:12:17.190 sources note that even after that big acquisition, 00:12:17.429 --> 00:12:19.649 they got out of the mortgage origination business 00:12:19.649 --> 00:12:23.309 again in 2017. Right. They laid off another 1100 00:12:23.309 --> 00:12:25.809 employees, basically saying the business was 00:12:25.809 --> 00:12:27.950 too competitive in a low rate environment to 00:12:27.950 --> 00:12:31.009 make enough money. It seems like while they mastered 00:12:31.009 --> 00:12:34.110 risk and cards and auto loans, that core mortgage 00:12:34.110 --> 00:12:36.289 business was just persistently difficult for 00:12:36.289 --> 00:12:38.529 them. OK, let's pivot to their structure today 00:12:38.529 --> 00:12:41.710 after all that diversification. Capital One is 00:12:41.710 --> 00:12:44.750 now this highly diversified financial conglomerate. 00:12:44.889 --> 00:12:47.129 It is. It operates across three main divisions. 00:12:47.210 --> 00:12:49.289 And while credit cards are still in its DNA, 00:12:49.529 --> 00:12:52.269 the portfolio is way more balanced than it was 00:12:52.269 --> 00:12:54.669 in those early monoline years. Looking at the 00:12:54.669 --> 00:12:58.090 data from 2018 to 2022, the credit cards division 00:12:58.090 --> 00:13:01.990 is still the engine. It was about 47 .3 % of 00:13:01.990 --> 00:13:04.929 total loans outstanding in 2018. And if you just 00:13:04.929 --> 00:13:07.129 look at volume, they are the third largest issuer 00:13:07.129 --> 00:13:10.070 of Visa and MasterCard globally. Only JPMorgan 00:13:10.070 --> 00:13:12.409 Chase and Citigroup are bigger. The second division 00:13:12.409 --> 00:13:15.129 is commercial banking. massive operation. It 00:13:15.129 --> 00:13:18.210 accounted for about 28 .6 % of their total loans, 00:13:18.250 --> 00:13:20.870 so something like $70 billion outstanding as 00:13:20.870 --> 00:13:23.750 of 2018. This is mostly secured lending commercial 00:13:23.750 --> 00:13:26.330 properties, multifamily housing, industrial stuff. 00:13:26.759 --> 00:13:28.960 And that provides some vital diversification 00:13:28.960 --> 00:13:31.059 away from the consumer credit cycle. It does. 00:13:31.220 --> 00:13:33.279 And then you have consumer banking, which covers 00:13:33.279 --> 00:13:35.779 all the retail branches in their huge car finance 00:13:35.779 --> 00:13:40.240 portfolio. That division was about 22 .9 % of 00:13:40.240 --> 00:13:44.139 their loans, with over $56 billion just in car 00:13:44.139 --> 00:13:46.850 finance loans. And they have a physical footprint 00:13:46.850 --> 00:13:50.309 of around 750 branches. Right. Including about 00:13:50.309 --> 00:13:53.029 30 of those cafe style locations that are aimed 00:13:53.029 --> 00:13:56.190 at a younger demographic, plus about 2000 ATMs. 00:13:56.350 --> 00:13:58.549 What's really interesting here is how they consciously 00:13:58.549 --> 00:14:01.870 connected their data driven origins from the 00:14:01.870 --> 00:14:05.210 90s to this modern structure. Through aggressive 00:14:05.210 --> 00:14:07.549 investments in fintech, they launched this whole 00:14:07.549 --> 00:14:10.389 targeted strategy of acquiring design and digital 00:14:10.389 --> 00:14:13.250 technology firms, not just other banks or loan 00:14:13.250 --> 00:14:16.250 books. It was a clear effort to embed that innovation 00:14:16.250 --> 00:14:18.529 culture into the company to future proof the 00:14:18.529 --> 00:14:21.950 user experience. In 2014, they bought Adaptive 00:14:21.950 --> 00:14:24.450 Path. Which was a major user experience and design 00:14:24.450 --> 00:14:26.610 consultancy in San Francisco. So they weren't 00:14:26.610 --> 00:14:28.509 just buying code, they were buying design talent 00:14:28.509 --> 00:14:30.950 and a culture of agile development. And that 00:14:30.950 --> 00:14:33.120 strategy continued. They bought Level Money, 00:14:33.259 --> 00:14:36.899 a popular budgeting app, in 2015. And Monsoon, 00:14:37.080 --> 00:14:39.379 a design and development shop, later that same 00:14:39.379 --> 00:14:42.539 year. They saw these tools not as competitors, 00:14:42.659 --> 00:14:46.039 but as necessary pieces to make their own banking 00:14:46.039 --> 00:14:49.620 products stickier and easier to use. Then came 00:14:49.620 --> 00:14:51.659 the acquisitions focused more on e -commerce. 00:14:52.000 --> 00:14:54.879 They picked up Paribus, a price tracking service, 00:14:55.120 --> 00:14:58.580 in 2016. Which they eventually folded into Wikipa, 00:14:58.679 --> 00:15:01.340 which they acquired in 2018 and rebranded as 00:15:01.340 --> 00:15:04.000 Capital One Shopping. They also bought Confirm 00:15:04.000 --> 00:15:06.940 in 2018 to bolster their digital identity and 00:15:06.940 --> 00:15:09.039 fraud alert services. If you connect this to 00:15:09.039 --> 00:15:11.320 the bigger picture, it shows this consistent 00:15:11.320 --> 00:15:13.789 focus on their core strength data. Absolutely. 00:15:13.970 --> 00:15:15.950 They're leveraging IT not just for risk modeling 00:15:15.950 --> 00:15:18.850 anymore, that's table stakes now, but for proactive 00:15:18.850 --> 00:15:21.330 customer engagement, intuitive design, fraud 00:15:21.330 --> 00:15:23.490 protection. They're trying to own that entire 00:15:23.490 --> 00:15:26.090 consumer ecosystem. Speaking of consumer engagement, 00:15:26.230 --> 00:15:28.389 let's look at their big retail credit card partnerships. 00:15:28.710 --> 00:15:30.950 They signed a major deal with Kohl's for its 00:15:30.950 --> 00:15:33.529 private label card back in 2011. And that contract 00:15:33.529 --> 00:15:36.210 was extended in 2014, so that relationship seems 00:15:36.210 --> 00:15:38.389 pretty stable. However, they hit a pretty significant 00:15:38.389 --> 00:15:41.179 roadblock with Walmart. They did. Capital One 00:15:41.179 --> 00:15:44.559 got that highly coveted Walmart deal in 2018, 00:15:44.879 --> 00:15:47.879 taking the business away from Synchrony. But 00:15:47.879 --> 00:15:51.000 the partnership just didn't last. Walmart terminated 00:15:51.000 --> 00:15:55.000 the deal in April 2024. Why? They cited performance 00:15:55.000 --> 00:15:57.399 and customer service failures by Capital One. 00:15:57.559 --> 00:16:00.720 And losing the Walmart portfolio is a major blow. 00:16:00.860 --> 00:16:03.080 It really underscores a critical point. Which 00:16:03.080 --> 00:16:05.980 is? That while Capital One excels at sophisticated 00:16:05.980 --> 00:16:09.360 data modeling and M &A, the operational execution 00:16:09.360 --> 00:16:12.220 like managing customer service at that kind of 00:16:12.220 --> 00:16:14.600 massive scale is often a much harder challenge. 00:16:14.860 --> 00:16:17.049 That's a great point. I mean, if your data models 00:16:17.049 --> 00:16:19.129 are so good, why did the customer service fall 00:16:19.129 --> 00:16:21.370 short enough to lose one of the biggest retail 00:16:21.370 --> 00:16:23.669 car portfolios in the country? It suggests there's 00:16:23.669 --> 00:16:25.850 a potential disconnect there between their technological 00:16:25.850 --> 00:16:27.850 brilliance and their day -to -day operational 00:16:27.850 --> 00:16:30.190 capabilities. And on the innovation side, we 00:16:30.190 --> 00:16:31.870 have to mention their flagship premium product, 00:16:32.110 --> 00:16:35.309 the Venture X Travel Rewards Card. Right. Introduced 00:16:35.309 --> 00:16:39.710 in late 2021. It's got a steep $395 annual fee, 00:16:39.830 --> 00:16:43.009 but it competes directly with the high -end cards 00:16:43.009 --> 00:16:45.570 from Chase and Amex. It just shows they're still 00:16:45.570 --> 00:16:48.590 aggressively using those data models to challenge 00:16:48.590 --> 00:16:51.669 competitors in the most lucrative spaces. Okay, 00:16:51.750 --> 00:16:54.789 all of that previous M &A activity, it just pales 00:16:54.789 --> 00:16:56.889 in comparison to their most recent move. The 00:16:56.889 --> 00:16:59.330 acquisition of Discover Financial Services. This 00:16:59.330 --> 00:17:01.250 is where it gets really interesting. The $35 00:17:01.250 --> 00:17:04.279 billion deal. Capital One announced on February 00:17:04.279 --> 00:17:07.900 19, 2024, that it was acquiring Discover in an 00:17:07.900 --> 00:17:10.490 all -stock transaction. And this isn't just about 00:17:10.490 --> 00:17:12.309 adding more customers. This is about changing 00:17:12.309 --> 00:17:14.210 the fundamental infrastructure of the American 00:17:14.210 --> 00:17:16.150 payment system. Just looking at the metrics, 00:17:16.369 --> 00:17:18.690 the combined company is now the largest credit 00:17:18.690 --> 00:17:21.529 card issuer in the U .S. It surpassed Chase and 00:17:21.529 --> 00:17:23.589 Citi. And like we said at the top, it solidifies 00:17:23.589 --> 00:17:26.390 capital on spot as the sixth largest U .S. bank. 00:17:26.509 --> 00:17:29.390 The sheer size of this new entity, it got immediate 00:17:29.390 --> 00:17:31.750 reactions. We saw this interesting dynamic play 00:17:31.750 --> 00:17:34.230 out. Jamie Dimon, the CEO of JPMorgan Chase, 00:17:34.369 --> 00:17:36.920 he actually welcomed the deal. He did, which 00:17:36.920 --> 00:17:39.839 was surprising. He publicly praised Capital One 00:17:39.839 --> 00:17:44.119 CEO Richard Fairbank. His view is basically let 00:17:44.119 --> 00:17:47.359 them compete. Competition is good. But regulators 00:17:47.359 --> 00:17:51.329 and lawmakers were. Less enthusiastic. Far less. 00:17:51.589 --> 00:17:54.750 The deal immediately faced massive scrutiny because 00:17:54.750 --> 00:17:57.349 it wasn't just about acquiring a loan book. It 00:17:57.349 --> 00:17:59.930 was about acquiring Discover's payment network. 00:18:00.250 --> 00:18:03.589 Right. Discover, Diners Club, and Pulse. They're 00:18:03.589 --> 00:18:06.029 the fourth major payments network in the U .S. 00:18:06.029 --> 00:18:09.309 after Visa, MasterCard, and Amex. And so the 00:18:09.309 --> 00:18:12.109 antitrust concerns just exploded. What were the 00:18:12.109 --> 00:18:15.349 specific worries from regulators? Two big areas. 00:18:15.549 --> 00:18:18.369 First, network competition. Critics argued that 00:18:18.369 --> 00:18:20.470 by folding Discover's network into the massive 00:18:20.470 --> 00:18:22.650 Capital One machine, it just reduces competition 00:18:22.650 --> 00:18:25.529 among payment processors. So Capital One can 00:18:25.529 --> 00:18:27.930 now route transactions through its own captive 00:18:27.930 --> 00:18:30.349 network. Right. Which puts pricing pressure on 00:18:30.349 --> 00:18:32.670 Visa and MasterCard, sure. But it could also 00:18:32.670 --> 00:18:34.670 reduce competition for merchants who rely on 00:18:34.670 --> 00:18:36.369 having network choice to keep their processing 00:18:36.369 --> 00:18:38.430 fees down. And the second concern was just about 00:18:38.430 --> 00:18:42.089 size. Pure consolidation. Yep. The New York attorney 00:18:42.089 --> 00:18:44.089 general launched an investigation in October 00:18:44.089 --> 00:18:47.150 2024, looking specifically at whether the takeover 00:18:47.150 --> 00:18:50.009 violated state antitrust laws. And on top of 00:18:50.009 --> 00:18:51.970 that, a proposed consumer class action lawsuit 00:18:51.970 --> 00:18:56.130 was filed in Virginia in July 2024. Alleging 00:18:56.130 --> 00:18:59.059 the same thing, basically. That the merger violates 00:18:59.059 --> 00:19:01.220 federal antitrust laws because it concentrates 00:19:01.220 --> 00:19:03.819 too much power in the hands of one issuer, which 00:19:03.819 --> 00:19:06.140 could lead to less choice and worse terms for 00:19:06.140 --> 00:19:09.420 consumers. So despite all of these huge legal 00:19:09.420 --> 00:19:12.299 and regulatory headwinds, the state investigation, 00:19:12.660 --> 00:19:14.819 the lawsuit, that too big to fail shadow the 00:19:14.819 --> 00:19:17.079 deal went through. It did. Approved by U .S. 00:19:17.099 --> 00:19:19.759 banking regulators in April 2025 and completed 00:19:19.759 --> 00:19:23.319 on May 18th, 2025. So the outcome is that Discover. 00:19:23.799 --> 00:19:26.680 Diners Club and Pulse are now all under the Capital 00:19:26.680 --> 00:19:28.740 One umbrella. Which is a true game changer. It 00:19:28.740 --> 00:19:30.960 gives Capital One a level of control over the 00:19:30.960 --> 00:19:33.200 entire payment lifecycle that very few other 00:19:33.200 --> 00:19:35.680 issuers have. That synergy controlling both the 00:19:35.680 --> 00:19:38.059 card and the network is projected to lead to 00:19:38.059 --> 00:19:40.579 massive cost savings and unprecedented leverage. 00:19:40.920 --> 00:19:43.519 It really alters the balance of power. Now we 00:19:43.519 --> 00:19:45.059 have to turn to the other side of the story. 00:19:45.500 --> 00:19:48.559 Because with that rapid expansion and tech reliance 00:19:48.559 --> 00:19:52.420 comes intense and very costly scrutiny from regulators. 00:19:52.740 --> 00:19:55.279 This is a crucial segment. It really illustrates 00:19:55.279 --> 00:19:58.079 the immense systemic and operational risks that 00:19:58.079 --> 00:20:01.119 come with banking at this scale. Let's start 00:20:01.119 --> 00:20:03.660 with the first major public enforcement action 00:20:03.660 --> 00:20:07.680 from the brand new CFPB back in 2012. This was 00:20:07.680 --> 00:20:09.940 a big deal. Because it really established the 00:20:09.940 --> 00:20:12.779 CFPB's authority right out of the gate. Capital 00:20:12.779 --> 00:20:15.960 One was fined by both the CFPB and the OCC for 00:20:15.960 --> 00:20:18.730 misleading millions of customers. The issue was 00:20:18.730 --> 00:20:21.650 centered on these ancillary or add -on products, 00:20:21.890 --> 00:20:24.049 things like payment protection, credit monitoring, 00:20:24.410 --> 00:20:27.170 identity theft alerts. So after you were approved 00:20:27.170 --> 00:20:29.470 for a card, they would call you. Exactly. And 00:20:29.470 --> 00:20:31.329 the allegation was that they used these high 00:20:31.329 --> 00:20:33.390 -pressure sales scripts to convince customers 00:20:33.390 --> 00:20:35.410 they had to buy these extra services or that 00:20:35.410 --> 00:20:37.390 they were free when in fact they were optional 00:20:37.390 --> 00:20:39.829 and had significant fees. And the regulatory 00:20:39.829 --> 00:20:42.660 response was swift and severe. It was. Capital 00:20:42.660 --> 00:20:46.460 One agreed to pay a staggering $210 million to 00:20:46.460 --> 00:20:50.000 settle. That included $150 million in civil penalties 00:20:50.000 --> 00:20:52.720 and mandatory refunds to 2 million customers. 00:20:53.160 --> 00:20:56.160 It was a very clear signal that those kinds of 00:20:56.160 --> 00:20:58.960 predatory sales practices would not be tolerated. 00:20:59.079 --> 00:21:01.480 Then, two years later, the focus shifted from 00:21:01.480 --> 00:21:04.509 sales to collections. Right. In 2014, Capital 00:21:04.509 --> 00:21:07.089 One and three collection agencies settled a class 00:21:07.089 --> 00:21:10.730 action lawsuit, agreeing to pay $75 .5 million. 00:21:11.130 --> 00:21:13.890 This was about violations of the Telephone Consumer 00:21:13.890 --> 00:21:17.289 Protection Act, the TCPA. They were accused of 00:21:17.289 --> 00:21:19.569 using an autodialer to call customers' cell phones 00:21:19.569 --> 00:21:21.670 without consent. Even for purely informational 00:21:21.670 --> 00:21:24.210 calls. What's particularly jarring about this 00:21:24.210 --> 00:21:26.170 period is how the company seemed to try and legally 00:21:26.170 --> 00:21:27.970 get ahead of future rules. You're talking about 00:21:27.970 --> 00:21:30.549 the change to their terms of use in 2014. I am. 00:21:30.589 --> 00:21:32.690 They controversially amended their terms, granting 00:21:32.690 --> 00:21:34.910 themselves the right to contact you in any manner 00:21:34.910 --> 00:21:37.529 we choose, which included the truly unnerving 00:21:37.529 --> 00:21:40.269 phrase about making a personal visit at your 00:21:40.269 --> 00:21:43.160 home and at your place of employment. A personal 00:21:43.160 --> 00:21:45.519 visit to my home. That's a terrifying shift in 00:21:45.519 --> 00:21:48.559 tone from what's in your wallet. They also asserted 00:21:48.559 --> 00:21:52.039 the right to modify or suppress caller ID, which 00:21:52.039 --> 00:21:54.579 is basically the right to spoof your number. 00:21:54.720 --> 00:21:56.619 The company tried to do some damage control, 00:21:56.900 --> 00:21:59.740 saying personal visits were a last resort for 00:21:59.740 --> 00:22:02.140 repossession. And spoofing was a technical thing, 00:22:02.279 --> 00:22:04.740 but the message was clear. It was a highly aggressive 00:22:04.740 --> 00:22:07.720 debt collection posture. But the regulatory failures 00:22:07.720 --> 00:22:10.920 went way beyond consumer interaction. They involved 00:22:10.920 --> 00:22:14.039 serious systemic weaknesses in protecting the 00:22:14.039 --> 00:22:16.589 financial system. We're talking about. Hundreds 00:22:16.589 --> 00:22:18.950 of millions of dollars in fines for money laundering 00:22:18.950 --> 00:22:22.609 failures. The first big one came in 2018. A hundred 00:22:22.609 --> 00:22:24.869 million dollar fine. For failing to monitor, 00:22:25.029 --> 00:22:28.170 detect, and prevent money laundering. The charging 00:22:28.170 --> 00:22:30.470 documents were really detailed, citing systemic 00:22:30.470 --> 00:22:32.509 deficiencies in their risk assessment, their 00:22:32.509 --> 00:22:34.849 remote deposit capture systems, and critically, 00:22:35.089 --> 00:22:37.410 their failure to file suspicious activity reports, 00:22:37.630 --> 00:22:39.890 or SARS. And this was linked directly to their 00:22:39.890 --> 00:22:42.990 fast M &A strategy. The second, much larger penalty 00:22:42.990 --> 00:22:47.750 came in January 2021. A $390 million fine from 00:22:47.750 --> 00:22:50.470 FinCEN, the Financial Crimes Enforcement Network, 00:22:50.710 --> 00:22:54.569 for anti -money laundering, or AML, control failures. 00:22:54.789 --> 00:22:56.849 And this fine was focused on a very specific 00:22:56.849 --> 00:23:00.180 portfolio. It was a small portfolio of check 00:23:00.180 --> 00:23:02.599 cashing businesses that Capital One had inherited 00:23:02.599 --> 00:23:05.640 through an acquisition around 2008 and then exited 00:23:05.640 --> 00:23:08.319 in 2014. The problem was that the compliance 00:23:08.319 --> 00:23:10.700 systems of the acquiring bank never properly 00:23:10.700 --> 00:23:13.140 integrated the high risk profile of that check 00:23:13.140 --> 00:23:15.400 cashing business. And the scale of that failure 00:23:15.400 --> 00:23:18.500 was staggering. It really was. Capital One admitted 00:23:18.500 --> 00:23:21.059 it failed to file thousands of suspicious activity 00:23:21.059 --> 00:23:24.039 reports and lapsed on currency transaction reports 00:23:24.039 --> 00:23:27.450 for about 50 ,000 cash transactions. Transactions 00:23:27.450 --> 00:23:31.609 valued at what? Approximately $16 billion. $16 00:23:31.609 --> 00:23:34.369 billion flowing through their systems unchecked 00:23:34.369 --> 00:23:37.109 for years. It's a profound example of aggressive 00:23:37.109 --> 00:23:39.269 growth just completely outpacing the necessary 00:23:39.269 --> 00:23:41.549 governance and compliance infrastructure. And 00:23:41.549 --> 00:23:43.630 of course, no discussion of Capital One's challenges 00:23:43.630 --> 00:23:46.710 is complete without the massive July 2019 security 00:23:46.710 --> 00:23:48.970 breach. Still one of the largest data breaches 00:23:48.970 --> 00:23:51.309 of personal information we've seen. The unauthorized 00:23:51.309 --> 00:23:54.230 access affected 106 million people in the U .S. 00:23:54.230 --> 00:23:57.650 and Canada. And the data included names, addresses. 00:23:58.069 --> 00:24:00.849 But also some really alarming specifics. 140 00:24:00.849 --> 00:24:04.210 ,000 social security numbers, a million Canadian 00:24:04.210 --> 00:24:07.990 social insurance numbers, and 80 ,000 bank account 00:24:07.990 --> 00:24:11.529 numbers. The hacker, Paige Thompson, a former 00:24:11.529 --> 00:24:14.710 Amazon Web Services engineer. was arrested pretty 00:24:14.710 --> 00:24:16.809 quickly. Which led to this crucial clarification 00:24:16.809 --> 00:24:19.710 from Amazon. They stated very clearly that the 00:24:19.710 --> 00:24:22.029 vulnerability was not in their underlying cloud 00:24:22.029 --> 00:24:24.789 infrastructure, but was a misconfiguration of 00:24:24.789 --> 00:24:27.109 the Capital One designed web application. Which 00:24:27.109 --> 00:24:29.349 put the blame squarely on Capital One's internal 00:24:29.349 --> 00:24:32.400 risk management practices. It did. And the immediate 00:24:32.400 --> 00:24:34.880 aftermath was messy. Capital One was heavily 00:24:34.880 --> 00:24:37.140 criticized for being slow to publicly acknowledge 00:24:37.140 --> 00:24:40.019 it 12 days after they found it and for issuing 00:24:40.019 --> 00:24:41.920 contradictory statements. Right. They first said 00:24:41.920 --> 00:24:44.119 no bank account or social security numbers were 00:24:44.119 --> 00:24:45.819 compromised and then they had to retract that. 00:24:45.900 --> 00:24:48.079 It caused huge confusion and eroded a lot of 00:24:48.079 --> 00:24:50.559 trust. And that organizational failure led to 00:24:50.559 --> 00:24:53.839 direct regulatory intervention. In August 2020, 00:24:54.180 --> 00:24:56.339 the Federal Reserve issued a cease and desist 00:24:56.339 --> 00:24:59.119 order. A legally binding order. A legally binding 00:24:59.119 --> 00:25:01.599 order to overhaul their governance, risk management 00:25:01.599 --> 00:25:04.400 and compliance. It was a clear sign the Fed saw 00:25:04.400 --> 00:25:07.019 the breach as a systemic failure, though that 00:25:07.019 --> 00:25:10.599 order was finally terminated in 2023. And finally, 00:25:10.680 --> 00:25:14.160 let's talk about the most recent saga, the 360 00:25:14.160 --> 00:25:18.259 savings lawsuits active between 2024 and 2025. 00:25:18.880 --> 00:25:21.839 This ties right back to the ING direct acquisition. 00:25:22.430 --> 00:25:25.170 The core allegation is pretty complex. Lawsuits 00:25:25.170 --> 00:25:27.529 claim Capital One unfairly kept interest rates 00:25:27.529 --> 00:25:32.190 super low like 0 .30 % for older or legacy 360 00:25:32.190 --> 00:25:35.029 savings accounts. While at the same time heavily 00:25:35.029 --> 00:25:37.269 promoting a new high interest product called 00:25:37.269 --> 00:25:40.319 360 performance savings. Exactly. The claim is 00:25:40.319 --> 00:25:42.420 that this practice essentially cheated longtime 00:25:42.420 --> 00:25:44.940 depositors out of competitive interest by making 00:25:44.940 --> 00:25:46.500 it really hard to know the difference between 00:25:46.500 --> 00:25:48.539 the two tiers. The stakes were raised dramatically 00:25:48.539 --> 00:25:51.920 in January 2025 when the CFPB sued them. Right. 00:25:52.039 --> 00:25:53.980 Accusing the bank of cheating savers out of about 00:25:53.980 --> 00:25:56.240 two billion dollars through deceptive, abusive 00:25:56.240 --> 00:25:58.640 and illegal practices. But then something strange 00:25:58.640 --> 00:26:01.759 happened. It did. The CFPB dropped its lawsuit 00:26:01.759 --> 00:26:04.480 in February 2025, right after a change in the 00:26:04.480 --> 00:26:06.900 U .S. administration. But even with the federal 00:26:06.900 --> 00:26:09.039 suit dropped, the legal challenges continued. 00:26:09.609 --> 00:26:12.450 New York State filed its own lawsuit in May 2025, 00:26:12.769 --> 00:26:15.930 and a federal judge rejected the company's proposed 00:26:15.930 --> 00:26:19.470 $425 million settlement. Which signals that the 00:26:19.470 --> 00:26:22.390 legal system is still really grappling with how 00:26:22.390 --> 00:26:25.670 to quantify and fix the harm caused by this kind 00:26:25.670 --> 00:26:28.309 of interest rate strategy. OK, to complete the 00:26:28.309 --> 00:26:30.390 picture, we need to look at how they cultivate 00:26:30.390 --> 00:26:32.930 their public image. through massive marketing 00:26:32.930 --> 00:26:35.470 campaigns, the public face of the algorithm. 00:26:35.730 --> 00:26:38.430 They are masters of using high -profile spokespeople. 00:26:38.509 --> 00:26:40.750 They launched that long -running What's in Your 00:26:40.750 --> 00:26:43.230 Wallet campaign with Alec Baldwin back in 2010. 00:26:43.529 --> 00:26:45.710 But that celebrity rotation is always in flux. 00:26:46.049 --> 00:26:48.970 After a run -in reported by TMZ, his contract 00:26:48.970 --> 00:26:51.170 wasn't renewed, and Jennifer Garner took over 00:26:51.170 --> 00:26:53.430 in 2014. They also got pretty creative in the 00:26:53.430 --> 00:26:55.009 digital space, and here's where it gets really 00:26:55.009 --> 00:26:57.170 interesting and a little weird. The Dragonforce 00:26:57.170 --> 00:27:00.730 ad. The Dragonforce ad. In 2012, they ran this 00:27:00.730 --> 00:27:03.329 ad with the British power metal band. It showed 00:27:03.329 --> 00:27:05.589 the guitarist playing on an asteroid while using 00:27:05.589 --> 00:27:07.589 the Capital One app to manage their accounts. 00:27:07.809 --> 00:27:11.529 It was bizarre, but memorable. A clear move to 00:27:11.529 --> 00:27:14.789 show off their digital side to, well, a non -traditional 00:27:14.789 --> 00:27:17.029 banking audience. But their biggest and most 00:27:17.029 --> 00:27:19.509 consistent brand investment is in sports marketing. 00:27:19.730 --> 00:27:23.049 Just massive sponsorships. They have really deep 00:27:23.049 --> 00:27:25.900 roots in college sports. They sponsored the Florida 00:27:25.900 --> 00:27:28.339 Citrus Bowl for years, renaming it the Capital 00:27:28.339 --> 00:27:30.539 One Bowl. And since then, they've only elevated 00:27:30.539 --> 00:27:32.339 their profile. They've been the title sponsor 00:27:32.339 --> 00:27:35.220 of the Orange Bowl since 2015, and their VentureX 00:27:35.220 --> 00:27:37.579 card is the presenting sponsor of the Rose Bowl 00:27:37.579 --> 00:27:40.680 game. For the NCAA overall, Capital One is one 00:27:40.680 --> 00:27:43.119 of the top three national sponsors. They pay 00:27:43.119 --> 00:27:46.200 an estimated $35 million a year. And that buys 00:27:46.200 --> 00:27:48.740 them not just a ton of advertising, but crucially... 00:27:49.180 --> 00:27:51.880 access to consumer data related to those events 00:27:51.880 --> 00:27:54.319 and the people who follow college sports. It's 00:27:54.319 --> 00:27:57.180 their data strategy applied to branding. Beyond 00:27:57.180 --> 00:27:59.240 college sports, they bought the naming rights 00:27:59.240 --> 00:28:01.920 for the big arena in Washington, D .C., now the 00:28:01.920 --> 00:28:04.160 Capital One Arena. And they even showed some 00:28:04.160 --> 00:28:06.720 local spirit, temporarily changing their logo 00:28:06.720 --> 00:28:09.319 to support the Washington Capitals during the 00:28:09.319 --> 00:28:12.079 2018 Stanley Cup Finals. Their pro league expansion 00:28:12.079 --> 00:28:15.099 is just as vast. Major League Baseball named 00:28:15.099 --> 00:28:17.559 them the official bank and credit card and the 00:28:17.559 --> 00:28:19.859 presenting sponsor of the World Series in 2022. 00:28:20.339 --> 00:28:22.700 So whether you're watching college hoops or pro 00:28:22.700 --> 00:28:26.140 baseball, Capital One is just unavoidable. Finally, 00:28:26.180 --> 00:28:27.940 let's try to get a balanced look at their corporate 00:28:27.940 --> 00:28:30.920 citizenship, which, despite that huge marketing 00:28:30.920 --> 00:28:33.289 budget, has drawn some pretty... pointed criticism. 00:28:33.470 --> 00:28:35.869 The National Committee for Responsive Philanthropy, 00:28:35.869 --> 00:28:39.009 or NCRP, was highly critical of them in the early 00:28:39.009 --> 00:28:41.789 2010s. They pointed out that Capital One's charitable 00:28:41.789 --> 00:28:45.329 giving was only 0 .024 % of its revenue, which 00:28:45.329 --> 00:28:48.769 was way less than the industry median of 0 .11%. 00:28:48.769 --> 00:28:51.829 The NCRP called their rate of giving dismal. 00:28:51.970 --> 00:28:54.230 Capital One did actively dispute those figures. 00:28:54.430 --> 00:28:56.670 They claimed their 2011 giving was about $30 00:28:56.670 --> 00:28:59.509 million, which was six times greater than the 00:28:59.509 --> 00:29:02.279 NCRP's estimate. It really just highlights how 00:29:02.279 --> 00:29:04.500 hard it is to transparently assess corporate 00:29:04.500 --> 00:29:07.259 charity. So what does this all mean? We followed 00:29:07.259 --> 00:29:10.059 Capital One on this improbable journey from a 00:29:10.059 --> 00:29:12.640 statistical startup that pioneered using data 00:29:12.640 --> 00:29:15.549 to price credit risk. Through this relentless 00:29:15.549 --> 00:29:18.470 series of acquisitions, Hibernia, North Fork, 00:29:18.470 --> 00:29:21.490 ING Direct, that turned it into this complex 00:29:21.490 --> 00:29:24.650 full service bank. That drive culminated in the 00:29:24.650 --> 00:29:27.670 massive absorption of Discover, vaulting them 00:29:27.670 --> 00:29:30.170 to the very top of the credit card world and 00:29:30.170 --> 00:29:32.130 cementing their place among the biggest U .S. 00:29:32.130 --> 00:29:34.809 banks. But hand in hand with that unparalleled 00:29:34.809 --> 00:29:37.410 growth is this consistent pattern of profound 00:29:37.410 --> 00:29:39.789 operational friction and regulatory failure. 00:29:39.950 --> 00:29:43.190 The fines. The settlements, $210 million for 00:29:43.190 --> 00:29:46.809 misleading sales, $75 .5 million for robocalls, 00:29:46.990 --> 00:29:49.170 nearly half a billion for money laundering failures, 00:29:49.390 --> 00:29:51.529 and the organizational collapse behind one of 00:29:51.529 --> 00:29:53.690 the biggest data breaches ever. It just shows 00:29:53.690 --> 00:29:56.269 the immense systemic and operational risks that 00:29:56.269 --> 00:29:58.170 come with a chasing scale that aggressively. 00:29:58.509 --> 00:30:00.049 And if we connect this to the bigger picture 00:30:00.049 --> 00:30:02.490 for you, the consumer, Capital One built its 00:30:02.490 --> 00:30:05.410 entire empire on leveraging your data to offer 00:30:05.410 --> 00:30:07.569 you customized financial products. That was its 00:30:07.569 --> 00:30:10.140 genius. But given the sheer scale of the data 00:30:10.140 --> 00:30:13.200 breaches affecting over 100 million people and 00:30:13.200 --> 00:30:15.440 their reliance on that data for everything from 00:30:15.440 --> 00:30:18.059 risk modeling to marketing, it raises a powerful 00:30:18.059 --> 00:30:20.849 question. How do you weigh the benefits of these 00:30:20.849 --> 00:30:24.009 personalized services, the custom rates, the 00:30:24.009 --> 00:30:26.470 tailored rewards against the increasing systemic 00:30:26.470 --> 00:30:28.650 risk and exposure from a financial institution 00:30:28.650 --> 00:30:31.829 of this immense size? That's the ultimate cost 00:30:31.829 --> 00:30:34.589 -benefit analysis. What is the true hidden cost, 00:30:34.769 --> 00:30:37.390 both to the system and to you, of becoming well 00:30:37.390 --> 00:30:39.690 -informed about your credit options when that 00:30:39.690 --> 00:30:41.829 knowledge is built by an enterprise that struggles 00:30:41.829 --> 00:30:44.789 to safely manage the sheer volume of data it 00:30:44.789 --> 00:30:47.049 collects? Something to mull over. That's been 00:30:47.049 --> 00:30:48.150 The Deep Dive. Thanks for listening.