International payments company Visa will buy the firm Plaid in a bid to move beyond card payments and into financial services apps that add greater value to customers.
Fintechs, otherwise known as challenger banks, are a new set of financial players who approach finance from the perspective of improving user experience, rather than advanced financial products, to help users get in control of their finances.
Visa, best known for its vast global card payments network, is parting with $5.3 billion to buy Plaid, according to the Wall Street Journal, which first reported the news.
Plaid’s technology is effectively an API sits between apps and the financial products they administer by granting secure access, and letting those apps do business smoothly.
For Visa, this means a direct ticket straight to the core of fintech companies, into which it now enjoys a privileged view into some of the fastest growing and most exiting disruptors in finance.
To do so, the card giant is paying well over Plaid’s most recent private valuation of around $2.65 billion. It has said it will pay through a combination of cash and debt issuance.
Strategically, such technology is important in terms of both short-term business and insurance against medium-term disruption. In the short-term, card companies like Visa have struggled into bank-to-bank payments most common in the B2B space. Meanwhile, for a similar reason that businesses pay each other in a way that avoids the card processing fees that pay Visa’s wages, the company is insuring against the possibility of consumer payment habits going the same way.
Just over a year before it’s own acquisition, Plaid bought Quovo, a platform for investment and brokerage aggregation, a popular service among wealth managers. Arguably, it’s this broader skillset that has opened up Plaid’s capabilities and piqued Visa’s interest.
At the time, Plaid wrote in a blog post, “we are extending our capabilities to a wider class of assets. Our goal is to make money easier for everyone, and doing so requires that we consider consumers’ financial lives holistically.”
Sourced from the Wall Street Journal, Plaid; additional content by WARC staff