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Visa to buy fintech Plaid in $5.3bn deal

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Via Financial Times

Visa agreed to acquire Plaid, a group that connects fintech companies with their customers’ bank accounts, for $5.3bn in the latest large tech-focused deal by the payments company.

The acquisition of the Silicon Valley company, which is backed by high profile tech investors including Mary Meeker and Andreessen Horowitz as well as Goldman Sachs, comes less than two years after it was valued at $2.65bn. 

For Visa the transaction indicates its latest effort to make a further push into the fast growing fintech sector. In 2017 it acquired a minority stake in Sweden’s payments provider Klarna, which became Europe’s most valuable fintech company in the summer.

Plaid provides so-called “aggregator” software that allows fintechs and other financial services companies to access client’s bank account information. Its clients include the financial planning apps Mint and Acorns and the money transfer app Venmo. 

“This acquisition is the natural evolution of Visa’s 60-year journey from safely and securely connecting buyers and sellers to connecting consumers with digital financial services,” said Al Kelly, chief executive and chairman of Visa. 

“The combination of Visa and Plaid will put us at the epicentre of the fintech world, expanding our total addressable market and accelerating our long-term revenue growth trajectory.” 

A year ago, Plaid bought rival aggregator Quovo for around $200m. Other aggregators include California’s Yodlee, which was bought by Envestnet for $660m in 2015, and Utah-based Finicity. 

The aggregators have long had uneven relationships with banks, which have expressed reservations about the aggregators’ ability to protect customers’ personal information. Of particular concern is “screen scraping,” where consumers provide their bank login details to third-party fintechs, rather than using secure APIs (application programming interfaces) that can transmit data from the bank without the release of passwords. 

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JPMorgan Chase recently banned fintechs from using its customers’ passwords to access their accounts. API connections require banks to come to explicit agreements with aggregators and fintechs, which screen-scraping does not. 

Visa’s move to take over Plaid could help strengthen relations with larger banks. In the press release announcing the deal on Monday, JPMorgan’s head of consumer banking endorsed the deal as “an important development in giving consumers more security and control over how their financial data is used.” 

“Protecting customer data and helping them share that information safely has long been a top priority for Chase. We look forward to partnering with Visa to continue building a great experience for our shared customers,” said Gordon Smith, co-president, JPMorgan Chase and chief executive of consumer and community banking.

Goldman Sachs served as the sole adviser to Plaid.

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