Visa buys Plaid
In what can be termed as the first acquisition in 2020, Visa, a leading global payment company is buying Plaid in a deal worth $5.3 billion — roughly double the start-up’s last private valuation.
Let's look at the deal through the lens of the parties affected:
Visa: From Visa’s perspective, this move is a step to expand its reach and stay innovative. The credit card business is not going anywhere — if anything, it’s getting stronger. With more tech giants like Apple, Stripe and Coinbase creating their own credit cards.
Plaid: For Plaid which enables applications to connect with users’ bank accounts. Plaid makes money every time a user accesses their account for a transaction. At the moment revenue from these recurring transactions now exceeds revenue earned from bank verification.
For employees and Investors of Plaid, this is a huge reward for them and it gives them access to Visa’s vast resources.
Banks: Banks intentionally choose to not upgrade their system. According to Ben Thompson "Many banks’ technical infrastructure is ancient and built around assumptions that did not include APIs for 3rd-parties. More importantly, though, is the power of inertia: as long as it is hard to move money around, the more likely it is that that money will stay in the bank, collecting minuscule interest; or, if customers need value-added services, the path of lowest resistance will be simply getting them from their bank."
Now that Plaid has solved this issue, it appears any hitch not solved by banks would be solved by outsiders, notably fintech companies. Could banks be giving up opportunities to make more money or are they more focused on where the money's really at?