(Photo: The Post)

Visa to acquire Plaid for US$5.3B

(Photo: The Post)

Visa Inc announced yesterday, January 13, it has reached an agreement to acquire financial technology firm Plaid, with total purchase consideration of US$5.3 billion.

“We are extremely excited about our acquisition of Plaid and how it enhances the growth trajectory of our business,” Al Kelly, CEO and chairman of Visa, stated.

Chairman and CEO of Visa Inc Al Kelly (Photo: Bloomberg)

“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,” he added.

Established in 2013, Plaid is currently connected with over 11,000 financial institutions across the United States, Canada and Europe. Having designed mobile apps such as Venmo, Acorns and Chime, the company makes it easy for people to securely link their bank accounts to the apps in order to manage their financial affairs.

“Consumers rely on these apps and services to help plan their spending, increase their savings, and monitor their investments,” the release from Visa stated.

Chime is one of the many applications designed by Plaid that people with Internet access use to sync their banking information with services that help with planning spending, increasing savings and monitoring investments. (Photo: Value Penguin)

As of December, Plaid said one in four people in the United States with bank accounts have connected to the fintech company through an app. In fact, 75 per cent of the world’s internet-enabled consumers used a fintech application to conduct transactions in 2019 versus 18 per cent in 2015, according to the EY Global FinTech Adoption Index 2019.

The acquisition will, therefore, improve Visa Inc’s access to financial technology space. According to Reuters, the transaction indicates how traditional financial firms are willing to pay huge sums to acquire businesses which have established a strong market presence in the digital and cashless economy.

“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.”

— Zach Perret, CEO and co-founder of Plaid.

The news agency also reported that, according to a source familiar with the matter, Plaid will be able to use the acquisition to leverage Visa’s global brand in expanding its own business.

“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.

Plaid co-founders William Hockey and Zach Perret (Photo: MSNBC)

“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, ” he continued.

The US$5.3-billion purchase price is almost double the valuation of Plaid, based on its last fund-raising when it issued Series C shares in December 2018 worth $250 million round that was announced. Visa expects the deal will close in the next three to six months, subject to regulatory approvals and other customary closing conditions.

Visa Inc. debit and credit cards are arranged for a photograph in Washington, DC, USA, on Friday, October 20, 2017. Visa will acquire financial technology company Plaid for US$5.3 billion. (Photo: Andrew Harrer/Bloomberg)

Visa will finance the transaction from cash on hand and debt issuance but will have no impact on Visa’s previously announced stock buyback programme or dividend policy.

Commenting on the acquisition, Gordon Smith, co-president, JPMorgan Chase and CEO of Consumer and Community Banking, said, “We believe Visa’s acquisition of Plaid is an important development in giving consumers more security and control over how their financial data is used… We look forward to partnering with Visa to continue building a great experience for our shared customers.”

Gordon Smith, co-president, JPMorgan Chase and CEO of Consumer and Community Banking
(Photo: The Business Journals

 Dan Schulman, president and CEO, PayPal, also shared that 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”.