A leader in electronic payments Visa acquired Plaid, which is an American platform creating connectivity infrastructure that enables digital apps to connect with user’s bank accounts.
Actually, the companies came to the agreement at the beginning of the year. The deal worth 5.3 billion USD required approval from The UK Competition and Markets Authority (CMA). And, finally, the body has come up with their decision. It approves the deal concluded between Visa and Plaid. The regulator considered that the joint business will face enough competition from other market participants.
The UK Competition and Markets Authority (CMA) has approved the purchase of the fintech startup Plaid by Visa. It was published on the official website of the UK government.
In January 2020, Visa announced the purchase of Plaid, an American fintech startup, for $ 5.3 billion. It is interesting to note that the value of the transaction is twice as much as the startup’s market valuation.
Plaid is an API provider that connects fintech companies with banks. A set of tools provided by the startup allows application developers to customize access to banking information and other financial data.
The startup’s API is used by more than 11 thousand financial institutions – a quarter of bank accounts in the US are connected to fintech applications through the Plaid interface. Its services are used by such companies as Coinbase, Gemini, TransferWise, Acorns, and Robinhood.
The CMA initiated a review of the Visa and Plaid transaction at the end of June 2020. The regulator refers to the Enterprise Act of 2002, which was specially designed to combat unfair competition.
In the UK, Plaid offers a Payment Initiation Service (PIS). As a PIS provider, Plaid can process payments on behalf of the payer. Customers get the opportunity to pay for a service directly from a bank account, buy goods, or transfer money – all in real time.
The CMA notes that PIS is in its “infancy” in the UK, but is gaining momentum more and more, thanks in large part to open banking. More and more players emerge in this market, so Visa and Plaid will face “sufficient competition” and their combined business will not be able to drive out the rest providers.
The CMA has determined that Plaid would be a growing competitive threat, but it is just one of several PIS providers operating in the UK. Moreover, some of them, such as TrueLayer, Tink, Token.io, and Yapily, have stronger competitive advantages compared to Plaid according to the release on the government website.
The deal between Visa and Plaid is following a general consolidation trend that is clearly observed in 2020. It’s worth noting the purchase of the E * Trade brokerage platform by the financial conglomerate Morgan Stanley in February, the purchase of the POS terminal manufacturer Ingenico by the French payment system operator Worldline on the same month, and finally, the acquisition of payment systems software company Galileo by the credit platform SoFi in April. There were also many other noteworthy deals that determine the financial landscale upon the whole and the state of the crypto industry, in particular.