After a year marred by an antitrust suit, Visa’s acquisition of Plaid has officially been called off as the CEO says regulatory reviews threatened consumers’ interests.
Visa originally announced that it was planning to buy the open banking platform in January 2020 to the tune of $5.3bn.
However, rumours soon started to circulate that the US Department of Justice would file an antitrust suit against the deal, fearing it would cause a monopoly situation in the online debit sector.
The regulator finally pulled the trigger on the suit in November, suggesting that Visa wanted to buy Plaid to avoid having to deal with the startup’s growing power as a competitor further down the line.
“If allowed to proceed, the acquisition would deprive American merchants and consumers of this innovative alternative to Visa and increase entry barriers for future innovators,” Makan Delrahim, assistant attorney general of the Justice Department’s Antitrust Division, said at the time.
This proved enough for the scaleup. On Tuesday January 12 Plaid CEO Zachary Perret announced that the deal had officially been terminated.
“Since founding Plaid eight years ago, we have been maniacally focused on expanding access and improving financial outcomes for consumers, developers and financial institutions – and the intent of joining Visa was to accelerate that work,” he said in a statement.
“Unfortunately, the pace of a multi-year regulatory review is not compatible with the fast-moving realities of a startup – and delaying close another year or more is not in the best interest of our customers, the financial system or consumers themselves.”
There is certainly some truth to that. News about the deal being cancelled comes after a year in which the coronavirus pandemic has changed the realities of the financial services industry.
Digital payments and online shopping are just two things that increased in 2020 as people became less inclined to use physical money or to even leave their homes in order to comply with mandated social distancing rules.
Perret argued that cancelling the deal would enable Plaid to tackle these changes and leverage these opportunities better.
“As a company, and as an industry, we have an urgent responsibility to stay focused on delivering the products and services on which consumers rely,” he said, adding that hundred “of new banks joined our platform and over 4,000 companies turned to Plaid” in the past year.
“Supporting the increased demand for digital finance that Covid has brought is our top priority,” Perret said.
“I expect 2021 to be more of the same. In addition to our ongoing focus on helping companies of all sizes deliver digital financial products, we have made significant progress in the ways that we work with financial institutions. Delivering on the promise of open finance is in everyone’s best interest and we’ll be working in lockstep with our customers and financial institutions to bring this to fruition globally.”
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