Finance

Visa just called off its $5.3 billion deal for Plaid following DOJ suit

  • Visa and Plaid have agreed to drop plans for the former to acquire the latter following an investigation by the Department of Justice into whether the deal was anticompetitive. 
  • Visa had first agreed to buy Plaid in January 2020 for $5.3 billion
  • The DOJ alleged Visa’s motivation for the deal was to limit the startup’s competitive threat to its $4 billion debit business. 
  • Despite axing the deal, Al Kelly, chairman and CEO of Visa, said he remained confident the deal would have prevailed in court, in a statement announcing the decision. 
  • “However, it has been a full year since we first announced our intent to acquire Plaid, and protracted and complex litigation will likely take substantial time to fully resolve,” Kelly said in the statement. 
  • Visit Business Insider’s homepage for more stories.

Visa and Plaid have agreed to call off their $5.3 billion deal, the companies said in a statement Tuesday.

Visa announced its plans to acquire Plaid in January 2020. But the deal faced regulatory scrutiny from the Department of Justice, which filed a suit against Visa in November alleging the payments giant was attempting to squash a potential competitor. 

Plaid serves as the behind-the-scenes piping between third-party apps and banks, enabling the former to access financial data on customers from the latter. 

Despite axing the deal, the card network remained firm the acquisition was on solid footing. 

“We are confident we would have prevailed in court as Plaid’s capabilities are complementary to Visa’s, not competitive,” Al Kelly, chairman and CEO of Visa, said in a statement regarding the termination of the deal. 

Read more: Plaid has been quietly building a new payments tool and Visa wants to buy it to squash competition, US antitrust regulators say

Visa initially planned to defend the acquisition, calling the DOJ’s case “legally flawed.” The DOJ cited internal communications at Visa in which execs discussed Plaid’s threat to Visa’s $4 billion debit business

“We believe the combination of Visa with Plaid would have delivered significant benefits, including greater innovation for developers, financial institutions and consumers,” Kelly said. “However, it has been a full year since we first announced our intent to acquire Plaid, and protracted and complex litigation will likely take substantial time to fully resolve.”

Meanwhile, Plaid, which works with fellow startups like Betterment, Coinbase, and Acorns, spoke to the significant growth it saw in 2020 as financial apps saw a large increase in popularity throughout the year.

Zach Perret, CEO and cofounder of Plaid, cited a more than 60% growth in customers in 2020, and the addition of “hundreds” of banks to the system in a statement.

“This past year saw an unprecedented uptick in demand for the services powered by Plaid, and our priority is to support the hundreds of millions of people who now rely on fintech,” Perret said in the statement.

See more:Plaid’s breakout stars: Meet the 14 people leading key initiatives across the $5.3 billion fintech that’s making financial data more accessible

“While Plaid and Visa would have been a great combination, we have decided to instead work with Visa as an investor and partner so we can fully focus on building the infrastructure to support fintech,” he added.

Visa and rival Mastercard both participated in Plaid’s $250 million Series C in 2018. 

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