Visa Inc grew into one of the world’s most valuable financial companies by serving as the pipes that help connect banks and merchants.
Now, it is making a major bet on doing the same for data between banks and financial start-ups.
Visa agreed to pay US$5.3 billion for Plaid, a financial technology (fintech) firm that connects popular apps such as Venmo to customers’ data in the established banking system.
Photo: AP
The deal caps a meteoric rise for Plaid and aims to keep fueling Visa’s own ascent, which has seen its stock triple in the past five years.
The sale price is double Plaid’s US$2.65 billion valuation in a 2018 funding round.
Plaid’s developer tools help power a range of popular financial apps — such as Venmo, Coinbase Inc and Acorns Grow Inc — by channeling the banking data that they need for their apps and Web sites.
Founded in 2012, the firm has more than 200 million accounts linked on its platform, an investor presentation said.
That access underscores the demand from consumers to send their data to services that can move funds between accounts or into cryptocurrencies, give advice on personal finances, or reimburse a friend after brunch.
“We don’t see changing Plaid’s model. We see helping them accelerate their growth,” Visa chief executive officer Al Kelly said on a conference call about the way that Plaid earns its fees.
However, the way that data is shared would probably change, Visa president Ryan McInerney said in an interview.
Visa would work with banking partners, including JPMorgan Chase & Co, to ensure that fintechs are collecting consumers’ data “appropriately,” McInerney said.
“We have deep relationships with most financial institutions and we intend to evolve” Plaid’s data practices, he said.
As a benefit, fintechs might get more reliable connectivity.
Visa and Mastercard Inc are also investors in the company, Plaid said in a blog post last year.
Visa said that it expects the takeover to close in the next three to six months, with the acquisition adding 80 to 100 basis points to revenue growth in fiscal year 2021.
Longer-term, the deal would let Visa play a greater role in the financial industry’s tech-driven evolution, Kelly told analysts on a call.
“We see this giving us options and growth potentials at least for the next decade,” he said.
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