Whoever had 13 days as their guess for when the first major fintech deal of 2020 would happen, you win the grand prize! A full 6 days earlier than the first monster payments deal of 2019, Visa acquired Plaid for $5.3 billion in cash and stock. For those of you asking, "Wait, what's a Plaid?", if you've ever linked your bank account to another service like Venmo, Coinbase or Expensify, you've used Plaid. They provide the underlying plumbing connecting the accounts and are the foundation beneath most of the US based fintech apps. It's a tremendous outcome for Plaid who last raised at a $2.6bn valuation, proving the value of selling picks and shovels, not reliant on the success of any individual product. While some have questioned the steep price Visa is paying (25x projected revenues), there is strategic value beyond the revenues for the payments giant. Becoming more relevant to startups in the payments space is an obvious benefit and will support their existing efforts. More important however, is the access to consumer data that Visa now has. Visa has historically served as plumbing for banks - the payments rails operating behind the scenes and on the back of the card. With Plaid they now get access to tremendous amounts of consumer banking data on top of card data.
“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. The combination of Visa and Plaid will put us at the epicenter of the fintech world, expanding our total addressable market and accelerating our long-term revenue growth trajectory.” - Al Kelly, Visa CEO
While access to consumer banking data is sure to irk some banking partners, Visa's pitch is surely going to go something along the lines of, "Look, we know we have access to a bunch more data but guess what - the infrastructure is also going to be a lot more secure. Oh, and we're Visa and you still need us, so take it or leave it."
For more behind the rationale of the acquisition, this piece by Ben Thompson of Stratechery is well worth a read.Read more...