Plaid: Visa’s pricey bet on the future of finance

(Image credit: 2013 AFP)

Visa has bought fintech start-up Plaid for a “whopping” $5.3bn, says Rey Mashayekhi in Fortune Magazine. Plaid has become an “indispensable piece of the fintech ecosystem”, helping connect one in four people with a US bank account to thousands of apps and services, including Venmo and Robinhood.

Visa hopes that Plaid’s technology will help flesh out its “non-card and [real-time] payments” services and this acquisition follows on from last year’s purchase of cross-border payments company Earthport.

Visa’s bet on Plaid is definitely “expensive”, but expensive “doesn’t mean wrong”, says Telis Demos in The Wall Street Journal. After all, while the use of credit and debit cards is growing, there is also a future “that doesn’t look so card-centric”, or in which “non-card payments grow even faster, especially globally”.

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In any case, buying Plaid can help Visa “push its existing payment tools to more customers, but also tap into growth of other networks and movements of money”.

Visa may be right to be worried by the fact that direct transfers between bank accounts using fintech apps “can bypass the traditional payments infrastructure and might over time pose a threat to Visa”, says Liam Proud on Breakingviews.

Still, its decision to pay billions for a firm that will only boost revenue by $100m a year suggests that “profiting from the fears of rich behemoths can be good business”. The big winners from all of this are likely to be Plaid’s rivals, such as PayPal’s Tink, who can now expect to command a “high valuation” from other firms worried about the future of finance.