Visa Abandons Acquisition of Fintech Plaid

Visa has abandoned its planned $5.3 billion acquisition of Plaid after the transaction was plagued by litigation.

The payments giant announced its plan to acquire Plaid, a fintech that enables users to connect their financial accounts to third-party mobile applications, exactly a year ago.

However, in a statement published yesterday, the two companies said the deal would not be going ahead due to “protracted and complex litigation” that would “likely take substantial time to fully resolve”.

Al Kelly, chairman and CEO of Visa, said: “We are confident we would have prevailed in court as Plaid’s capabilities are complementary to Visa’s, not competitive. We believe the combination of Visa with Plaid would have delivered significant benefits, including greater innovation for developers, financial institutions and consumers.”

Zach Perret, CEO and co-founder of Plaid, added: “While Plaid and Visa would have been a great combination, we have decided to instead work with Visa as an investor and partner so we can fully focus on building the infrastructure to support fintech.”

Plaid grew its customer base by more than 60% last year during the pandemic as individuals and businesses switched to online banking and payments, Perret said.

The US Department of Justice (DoJ) launched a lawsuit against the acquisition in November, arguing that Visa was effectively trying to remove a potential innovative competitor from the market.

According to the Financial Times, the DoJ claimed in its lawsuit that Visa executives believed there was “potential downside risk of $300m-$500m” to the company’s US debit business over the next few years if Plaid was bought by a rival.

Visa has argued that the DoJ had failed to understand both Plaid’s business model and the competitive landscape of the payments industry.

Makan Delrahim, the US assistant attorney-general, described the decision to abandon the deal as “a victory for American consumers and small businesses”. 

In the statement this week, Visa’s Kelly said the company would focus on “advancing our broader strategy and continuing to drive Visa’s three growth pillars: consumer payments, new flows, and value-added services”.

“We have great momentum to build upon,” he said, highlighting a 70% growth in its Visa Direct payment solution.

“We have great respect for Plaid and the business they have built and look forward to our continued partnership,” he said.