Plaid will help expand its access to financial-technology firms while accelerating its movement outside of cards, Visa CEO says
- Visa is acquiring Plaid for $5.3 billion, 2x its final private valuation
- Visa to Pay $5.3 Billion for Fintech Startup
- Why Visa Is Buying Fintech Startup Plaid For $5.3 Billion
Visa Inc. announced on Monday that it would buy Plaid Inc. for $5.3 billion, as part of an effort by the card giant to tap into consumers’ growing use of financial-technology apps and noncard payments.
Plaid develops financial services APIs. It is akin to what Stripe does for payments, but instead of facilitating payments, it helps developers share banking and other financial information more easily. It’s the kind of service that makes sense for a company like Visa.
Visa is the largest U.S. card network, handling $3.4 trillion of credit, debit and prepaid-card transactions in the first nine months of 2019, according to the Nilson Report. Its clients are largely comprised of banks that issue credit and debit cards, but the company is looking to expand its presence in the burgeoning field of electronic payments, where trillions of dollars are sent by wire transfer or between bank accounts globally each year.
“Financial applications have historically used Plaid primarily to interact with checking and savings accounts. In acquiring Quovo, we are extending our capabilities to a wider class of assets.”
The deal is expected to close in the next three to six months, pending regulatory approval.
Plaid’s exit price is a triumph for its investors, who put a combined $353.3 million into the company, according to Crunchbase data. Most important among those rounds was a $250 million infusion that came in late 2018. Index and Kleiner led that round, valuing Plaid at $2.65 billion, or 50% of its final sale price (we doubt that that ratio is a coincidence).
At the same time, it was later revealed, Mastercard and Visa also took part in the round, with TechCrunch reporting in 2019 that the two payments giants “quietly participated in the round.”
Whether those investments were large enough to grant Visa information rights isn’t clear, but certainly the two credit card giants had more insight into what Plaid was doing than they did before their investment. We can presume, then, that Plaid was doing well as a private company; no one pays twice a multi-billion-dollar valuation for a firm unless they want to keep it away from their core business, or a key competitor.