Failed Plaid-Visa Merger
Plaid’s planned $5.3 billion merger with Visa fell apart earlier this month after the Department of Justice (DOJ) filed an antitrust lawsuit.
Plaid is a platform that lets customers link bank accounts to a fintech app such as Robinhood or PayPal. You log in via Plaid’s interface, but the bank itself is cut out of the loop.
Banks hate that.
Ask yourself this: If a fintech’s business model was built off leveraging information in your bank account, what would the bank’s want in return?
My answer: Money.
One could argue that the bank has the customer relationship, and should, as a result, receive compensation from extracted data.
Now, toss is the concepts of data security and consumer privacy. We hit grey area quickly.
Shielded under a potential merger with Visa, with whom many of these banks have a great relationship with, Plaid avoided a great deal of backlash. Now, we may see banks re-escalate this narrative.
According to Lisa Ellis, payments researcher at the firm MoffettNathanson, the primary angle the DOJ took was curbing big tech firms buying small, potential competitors and take them out of the market early on.
Though this concept has been around in antitrust law for some time, the DOJ appears to now be incorporating this concept much more actively.
The concept that larger firms may be motivated to inhibit competition in their spaces by acquiring and then retrofitting - or in an extreme scenarios actually outright shutting down these competitors.
With the change in administration, Biden has stated that the Consumer Financial Protection Bureau will be a large priority. Specifically, in terms of increasing scrutiny on consumer protection in general - which will presumably include fintech companies.
The scrapped Plaid-Visa deal is is similar to an announcement made last week by Procter & Gamble and Billie, a subscription service for women’s body-care products. These two companies said they would terminate a planned merger following a lawsuit from federal regulators alleging the deal was anti-competitive.
American Banker points out that it wasn’t clear what Visa would have done to expand its own business with Plaid.
Thought bubble: I think it is feasible to see a future where Plaid is a significant competitor to Visa — specifically within the payments space.
CEO, Zach Perret, hasn’t confirmed whether he hopes to turn Plaid into a money-moving company — rather than a back-end payment tech enabler — but the possibility already has investors’ appetites.
Cheers
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