Visa to Acquire PlaidGorkem Cokcetin
Call it an expansion of the Visa network-of-networks model. Visa said it will buy Plaid — which focuses on the development of application programming interfaces (APIs) that allow consumers to share their data with thousands of apps — for $5.3 billion.
On a conference call with investors following the announcement, Visa CEO Al Kelly said that “Plaid opens up new market opportunities by significantly expanding Visa’s network capabilities,” adding that Plaid provides “a terrific platform for extending” Visa’s integrated payment solutions and value-added services.
Visa, management said on the call, will capitalize on what was termed a FinTech-driven evolution that is currently shaping financial services, as well as growing Visa’s core payments business. In terms of mechanics, the acquisition — which involves a cash payment of $4.9 billion, with the remainder tied to deferred equity and retention equity — is slated to close within three to six months, assuming regulatory approval.
The deal is only the latest salvo and nod to the importance of data access and connectivity across traditional financial institutions and FinTech upstarts. In one recent example from late last year, The Clearing House released a template designed to help banks link with FinTech firms, and connect to APIs.
Delving into The Numbers
In supplemental materials and commentary provided on the Visa/Plaid call, Visa noted that as many as one in four U.S. bank account holders have used Plaid’s offerings. That activity comes against a larger backdrop where FinTech is gaining ground.
The money movement? Well, that’s a factor that plays deeply into Visa’s decision to buy Plaid. However, as Kelly said on the call, the deal helps Visa expand beyond payments, and boost its role as what has been called (on the most recent call, and in the past) a “network of networks.”
Connectivity between banks and developers has become critically important in a many-to-many model. Providing that connectivity through the Plaid deal will enable Visa to partner with a range of fast-growing FinTech firms, said Kelly, partly through developer services that Visa does not provide at present.
He added that there will also be the opportunity to enhance services and products for overseas clients, especially those located in Open Banking markets. Kelly said that consumers would be at the centre of managing their data, as well as how and where that data is used (Plaid offers tools tied to establishing authentication and user consent).
In data illustrating Plaid’s scale and reach, management from the two companies said that Plaid connects more than 11,000 banks and financial services companies, as well as more than 2,600 FinTech firms, and touches more than 200 million accounts globally. The compound annual growth rate (CAGR) of accounts linked to Plaid has measured 115 percent since 2015.
According to figures cited by Visa, 75 percent of “internet-enabled” customers around the globe have used a FinTech product and service — such as those from Acorn, Betterment, Venmo and others — to move money between accounts. That’s up from 18 percent in 2015.
The company also operates in Canada and the U.K., and is in beta in Ireland, France and Spain. With a focus on connectivity and networks, said Plaid Co-founder and CEO Zach Perret on the call, Visa and Plaid “share similar business models.”