Visa to buy fintech start-up Plaid for $5.3bn
Visa has announced the acquisition of fintech firm Plaid for $5.3 billion.
Plaid, which calls itself the “plumbing” behind fintech, provides the application programme interfaces (APIs) which connect users’ bank accounts with third party providers (TPPs) such as Venmo, Square Cash and Robinhood.
The size of the deal is roughly double the Californian fintech’s last private valuation of $2.65 billion from late 2018, when it raised $250 million in a Series C funding round. Early investors in the fintech included its acquirer Visa, as well as Visa’s rival Mastercard. Goldman Sachs – also the exclusive adviser on the new deal – was involved, alongside the venture arms of Citi and American Express.
To build its value, Plaid also bought Quovo in 2018, giving the fintech a foothold into the world of investment data which took its offering beyond just checking and savings accounts.
Investors of Plaid put a collective $353.3 million into the fintech, according to Crunchbase data, which means at a selling price of $5.3 billion investors may have done very well off the new deal.
The fintech has, until now, found it difficult to sell its products into some US banks, despite now working with more than 11,000 financial institutions. Banks will occasionally cite the risk of a breach as a reason why they cannot work with a third party like Plaid.
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But with the acquisition of Plaid by Visa, it puts the 2012-founded company under a familiar, trusted name and moves its status away from a small fintech on the periphery in the eyes of major banks. PNC Bank was one of the latest cases to reject a partnership with Plaid on the basis of information security risks.
Plaid’s 2019 revenue was between $100 and $200 million according to Forbes sources, flagging that the acquisition of the fintech by Visa can’t be because of its revenue figures. Working with most of the US’s largest fintechs, including Chime, Acorns, Robinhood, and Coinbase, Plaid can give Visa access to huge swathes of tech-savvy customers.
This, compounded with Visa’s global footprint, will give Plaid the platform it needs to go global.
CEO of Plaid Zach Perret, 32, confirmed this motive in a statement on the deal: “We’ll be able to lean on their brand, resources, and international footprint to benefit our customers, our partners, and the markets we serve.”
Visa says it anticipates the acquisition of Plaid to close in the next three to six months, paying the $5.3 billion with $4.9 billion in cash and $400 million in stock.