Based on a statement from Visa on January 13, 2020, the credit card giant has decided to go through with purchasing the financial-tech company Plaid for $5.3 billion. This is almost twice the amount that the start-up was valued at in its last private valuation. The transaction for Visa to take ownership of Plaid is expected to occur within the next three to six months.
Visa explained in their online newsroom that, “We are extremely excited about our acquisition of Plaid and how it enhances the growth trajectory of our business,” said Al Kelly, CEO, and chairman of Visa. “Plaid is a leader in the fast-growing fintech world with best-in-class capabilities and talent. The acquisition, combined with our many fintech efforts already underway, will position Visa to deliver even more value for developers, financial institutions, and consumers.”
“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,” said Kelly. “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.”
What to Know About Visa
Visa is a leader in the world of digital payments with a mission of connecting the world using the most reliable, innovative, and secure payment network so businesses, economies, and individuals can thrive. Visa has a global processing network called VisaNet that offers secure payments on a worldwide level. It has the potential of processing at least 65,000 transaction messages each second.
The company has a focus on innovation as a way to create rapid growth of digital commerce on any device used by anyone; anywhere. While the world is moving from an analog to a digital landscape, the company is working to reshape the future of commerce through its products, brand, network, people, and scale.
Important Facts About Plaid
While Plaid is lesser known than Visa, it’s still a name that you may have heard in the past. Plaid is a data network used to power fintech tools used by millions of customers to create healthier financial lives. Major services and apps like Betterment, Venmo, Acorns, and Expensify use Plain to connect their financial accounts with various services and apps.
The start-up connects with more than 11,000 financial institutions in the United States, Europe, and Canada. It was founded in 2013 and is currently headquartered in San Francisco, California.
“Plaid’s mission is to make money easier for everyone, and we are excited for this opportunity to continue delivering on that promise at a global scale,” said Zach Perret, CEO and co-founder of Plaid. “Visa is trusted by billions of consumers, businesses, and financial institutions as a key part of the financial ecosystem, and together Visa and Plaid can support the rapid growth of digital financial services.”
What This Deal Is All About
Visa has decided to be picking up Plaid, a Silicon Valley start-up company, which is used to let many companies connect to their users’ bank accounts. Plaid is well known in the financial technology world but may not be a name that the average person would recognize.
Based on information from Plaid in December, one in four individuals in the United States who have a bank account have connected to Plaid using at least one app. Both Visa and its rival, Mastercard, invested early in the start-up, as did American Express and Citi’s venture arms. Based on information from someone familiar with the negotiations, Goldman Sachs was the only advisor for the deal.
In 2018, Plaid raised $250 million in Series C funding to propel its valuation all the way up to $2.7 billion. At this same time, venture capitalist Mary Meeker was also added to Plaid’s board of directors. In total, the company has raised over $310 million since being founded back in 2012.
Two years ago, Plaid bought Quovo in a move to function beyond banking and into other financial investments and services. The idea was to create a holistic platform that could be used for all sorts of financial service providers. The founders wrote a blog post that noted, “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.”
With Visa to acquire Plaid, it’s hard to say what the results will be. However, it is expected that it will offer considerable benefits to consumers, developers, and financial institutions.
“We have strong relationships with both Visa and Plaid. The combination of Plaid’s capabilities with the security and scale of Visa’s global network will provide us with exciting opportunities to enhance our products,” said Dan Schulman, president, and CEO, PayPal.