Visa Pulls Out From $5.3 Billion Deal with Plaid

 
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The DOJ claimed that Visa is enjoying a monopoly on the online debit business, charging exuberant fees from both merchants and consumers to process online payments, which brings them billions of dollars in fees each year.

Consumer credit giant Visa Inc (NYSE: V) announced on January 12 that its deal to acquire financial technology company Plaid has been terminated. Visa made the announcement following the United States Department of Justice’s (DOJ) lawsuit which sought to block the proposed $5.3 billion deal on antitrust grounds. 

Visa announced the deal to acquire data-focused fintech API startup, Plaid on January 13, 2020 in a bid to boost their access to the booming financial technology sector. The Department of Justice however filed a civil antitrust lawsuit on November 5, 2020 aimed at stopping the merger, claiming that the then proposed merger would “eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers.”

The DOJ also claimed that Visa is enjoying monopoly on the online debit business, charging exuberant fees from both the merchant and consumer to process online payments, which brings them billions of dollars in fees each year. Visa however countered those claims, stating that the government’s point of view was “flawed.”

Chairman and CEO of Visa, Al Kelly speaking after the deal said in a released statement that the merger was called off to avoid protracted litigation as that would take a long time to sort out. He added that Visa was confident in beating the lawsuit in court as “Plaid’s capabilities are complementary to Visa’s, not competitive.”

Assistant Attorney General Makan Delrahim in a released statement stated that Plaid and other fintech startups and innovators now have the green light to develop potential alternatives to Visa’s online debit services. He labeled Plaid’s now null merger with Visa as an “anticompetitive one” and added that consumers can expect better services at lower prices when there’s competition. 

Plaid is a fintech firm serving as a fiat bridge for several cryptocurrencies and decentralized finance (DeFi) applications. The firm also develops financial services APIs, and provides similar services to that of Stripe except it doesn’t just facilitate payments, it helps developers in sharing banking and other financial information with ease. 

In a released statement last year, the firm revealed that demand for services provided by Plaid had seen an unprecedented rise. Plaid also saw a rise in demand for its offerings as both consumers and fintech companies were executing more transactions last year with regards to the fintech boom. Plaid also told reporters that the firm saw a 60% customer growth in 2020, adding over 4,000 new clients to their platform. The firm was reported to have earned approximately $100 million in 2019 by the Department of Justice. 

Plaid has previously collaborated with Coinbase, one of the largest online cryptocurrency platforms in the US and at least two DeFi startups. The firm also purchased Quovo in June 2019, in a bid to spread its wings beyond banking into broader financial services and investments. The idea was to provide a more holistic platform for financial services providers.

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