Tech World

Visa cancels acquisition of Plaid after running into the regulatory wall

Visa will not acquire Plaid after running into regulatory wall

The regulatory wall has made many fintech call of their deals. Visa and Plaid also called off their deal, ending the company’s takeover of the fintech API startup.

The deal, valued at USD 5.3 billion at the time of its announcement, first broke cover on January 13, 2020, nearly a year ago. The Department of Justice filed a complaint to block the acquisition in November 2020, making an arguing that the amalgamation would eliminate the emerging competitive threat and would likely result in considerable savings and innovative online debit services for consumers.

In a press release, Visa wrote that it could have eventually executed the deal, but that protracted and complex litigation would take lots of time to sort out and said that the government’s point of view was flawed.

Plaid was upbeat in its notes, writing that in the last year it has seen an unprecedented rise in demand for the services powered by Plaid. 2020 witnessed a fintech boom, as consumers shifted to free stock trading apps and Neobanks leading to Plaid also witnessing a growth last year. Plaid’s product fits well between consumers and fintech companies, so if those parties were executing more transactions, the API startup likely saw more demand for its offerings.

Plaid saw 60 percent customer growth in 2020, adding more than 4,000 clients. Plaid likely witnessed positive growth and it had likely grown by triple-digits last year, in percentage terms.

The visa-Plaid deal was merely a single transaction, and it did not go well for other fintech startups. The Department of Justice may have likely undercut the chances of M&A exits for some fintech-focused startups or at least created more vulnerability around that possible exit path.

Expected exit valuations for fintech startups will likely fall. And that could likely enhance both fintech-focused venture capital activity and the price at which startups in the niche can raise funds. If the Visa-Plaid deal was a huge boon to fintech companies that used it as a model to raise money at a higher value, the opposite also may prove to be true.

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