Visa Expands Fintech Ecosystem with $5.3 Billion Plaid Acquisition

Need to Know

• Visa has signed a definitive agreement to acquire fintech data network Plaid for $5.3 billion, double the final private valuation of the startup. 
• Founded in 2013, Plaid has 450 employees and is a financial data network that makes it easy for people to securely connect their financial accounts to the apps they use to manage their financial lives. It is currently used by thousands of apps and services like Acorns, Betterment, Chime, Transferwise and Venmo.
• Plaid provides secure connections for 80% of the largest US fintech apps and has over 200+ million consumer accounts. 
• Last year, Plaid’s revenue hovered between $100 and $200 million.
• One in four US citizens with a bank account have used a Plaid service.

Analysis

With a reported 75% of the world’s internet-enabled consumers using a fintech application to initiate money movement in 2019, Visa’s acquisition of Plaid provides significant benefits to developers, financial institutions and consumers.

With the surge of mobile payment services like Venmo, connectivity between financial institutions and developers has become increasingly important. Customers look for safe and secure connections while developers look for reliable and accurate data shared in a cost-effective way – both it seams are looking for Plaid. Visa reports that one in four people with a US bank account have used Plaid to connect to more than 2,600 fintech developers across more than 11,000 financial institutions. 

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

Founded in 2013, Plaid quickly shot to the top after a partnership with Venmo provided validation among other fintech’s. “When we began our journey, nobody had heard of fintech — and today we have a growing fintech ecosystem that is significantly improving the way that consumers live their financial lives,” said Zach Perret Co-Founder and CEO of Plaid. 

Adding, “Joining forces with Visa…represents an incredible opportunity to continue to scale our products. We’ll be able to lean on their brand, resources, and international footprint to benefit our customers, our partners, and the markets we serve.”

What does the acquisition mean for Visa? Visa explains that it represents entry into new business and enhancement of existing ones expanding market opportunities in both the U.S and internationally. It also enables them to deliver enhancement payment capabilities and value-added services to fintech developers allowing them to work together more closely and drive Visa’s core business. 

The acquisition is expected to close in the next three to six months and is subject to regulatory approvals and other customary closing conditions. Plaid CEO and co-founder Zach Perret will continue to run Plaid, reporting to Visa Chief Product Officer, Jack Forestell. 

The fintech market has been extremely hot recently. PayPal recently bought 350-employee Honey for $4 billion, working out to a valuation of 40 times Honey’s annual revenue price and $114 million per employee. Visa is paying roughly 35 times the revenue of Plaid, according to an acquisition deck, and paying $118 million per employee.