Visa agreed to acquire Plaid, a group that connects financial technology companies with their clients’ bank accounts, for $ 5.3 billion in the last major agreement focused on the payment company’s technology.
The acquisition of the Silicon Valley company, which is backed by high-profile technology investors, including Mary Meeker and Andreessen Horowitz, as well as Goldman Sachs, occurs less than two years after it was valued at $ 2.65 billion.
For Visa, the transaction indicates its latest effort to further boost the fast-growing fintech sector. In 2017, it acquired a minority stake in Sweden’s payment provider Klarna, which became Europe’s most valuable financial technology company in the summer.
Plaid provides the so-called “aggregator” software that allows fintech and other financial services companies to access customer bank account information. Its clients include the Mint and Acorns financial planning applications and the Venmo money transfer application.
“This acquisition is the natural evolution of Visa’s 60-year journey from the secure connection of buyers and sellers to the connection of consumers with digital financial services,” said Al Kelly, executive director and president of Visa.
“The combination of Visa and Plaid will place us at the epicenter of the fintech world, expanding our total addressable market and accelerating our long-term revenue growth trajectory.”
A year ago, Plaid bought the rival aggregator Quovo for about $ 200 million. Other aggregators include the California Yodlee, which was purchased by Envestnet for $ 660 million in 2015, and Finicity, based in Utah.
Aggregators have long had unequal relationships with banks, which have expressed reservations about the ability of aggregators to protect customers’ personal information. Of particular concern is “screen scraping,” where consumers provide their bank login data to third-party fintechs, instead of using secure APIs (application programming interfaces) that can transmit bank data without releasing passwords
JPMorgan Chase recently said it would prohibit fintech from using their customers’ passwords to access their accounts. API connections require banks to reach explicit agreements with aggregators and fintechs, which does not do screen scraping.
Visa’s decision to take over Plaid could help strengthen relations with larger banks. In the press release that announced the agreement on Monday, JPMorgan’s head of consumer banking approved it as “an important step forward to provide consumers with more security and control over how their financial data is used.”
“Protecting customer data and helping them share that information securely has long been a priority for Chase. We look forward to partnering with Visa to continue building a great experience for our shared clients, “said Gordon Smith, co-chair, JPMorgan Chase and executive director of consumer and community banking.
Goldman Sachs was Plaid’s only advisor.