5.3 billion acquisition
Visa is buying fintech Plaid (a company that it is now used by an estimated 25% of consumers in US, connecting users to 11,000 financial institutions). Amount of deal: $5.3 billion.
Plaid offers technology that allows consumers to link their bank accounts to its 2,600 fintech clients. Here there are included peer-to-peer (P2P) payments app Venmo, investing platform Acorns as well as stock-trading startup Robinhood. It is one of several players developing back-end infrastructure to enable fintechs to operate.
This deal size is within the rapid industry consolidation: providers look to M&A to avoid competition from upstarts in order to be better prepared for major shifts in the space, and to combat low margins.
Visa and Mastercard are known for high fees they charge for payments to companies for POS (Point Of Sale) devices connected as well as for settlement with banks. Due to kind of large banking network they have, they were kind of monopol.
However, PSD2 is opening the market of payments (at least in EU) to fintechs that can do payments in the name of clients, accessing bank accounts in their name.
The deal of Visa with Plaid is no exception: Visa sees Plaid as a tool that will help it in the next decade by improving fintech relationships and expanding Visa’s addressable market (according to CNBC).
But what’s in it for Plaid? Although they have such a significant traction in US, Visa can boost its operations outside US. Moreover, due to good reputation of Visa throughout banks, financial institutions will be more willing to allow data-sharing with Plaid.
We live interesting times, I keep an eye on these evolutions since PSD2 entered into force and banks (at least in EU) are to allow fintechs to create products for banks clients, accessing bank accounts, balances, transactions, all of these being for the benefit of final consumer.