Last year, Plaid, a technology platform that connects various applications with users’ bank accounts and has a growing presence in the mortgage space, secured investments from Visa and Mastercard.
The fintech company did not reveal at the time how much the credit card companies were investing, but it turns out that Visa’s interest in Plaid was much more than just exploratory as the credit card giant is now set to buy Plaid.
Visa announced Monday that it reached an agreement to buy Plaid for a total purchase consideration of $5.3 billion.
That figure is exactly twice as much as Plaid’s reported valuation in late 2018 when it raised $250 million in its Series C funding round at a valuation of $2.65 billion.
Noted venture capitalist Mary Meeker led that funding round, with participation from Andreessen Horowitz, Index Ventures, Norwest Venture Partners, and Coatue Management, along with existing investors Goldman Sachs, NEA, and Spark Capital.
Plaid later brought on Visa and Mastercard as investors but now, Visa is set to buy the company flat-out.
“We are extremely excited about our acquisition of Plaid and how it enhances the growth trajectory of our business,” said Al Kelly, CEO and chairman of Visa. “Plaid is a leader in the fast-growing fintech world with best-in-class capabilities and talent. The acquisition, combined with our many fintech efforts already underway, will position Visa to deliver even more value for developers, financial institutions and consumers.”
In the mortgage space, Plaid, a 2019 HW Tech100 winner, provides an asset verification program that can be used as part of Fannie Mae’s Day 1 Certainty program.
The company expanded last year when it acquired Quovo, another company that also connects applications to customers’ accounts, although Quovo’s business is focused more on investment and brokerage accounts. Plaid reportedly paid around $200 million for Quovo.
But that deal pales in comparison to Visa’s deal to acquire Plaid itself.
According to a release, Visa views the acquisition as an entry into new businesses and “complementary” to its existing businesses.
“First, Plaid’s fintech-centric business opens new market opportunities for Visa both in the U.S. and internationally,” the company said in a release. “Second, the combination of Visa and Plaid provides the opportunity to deliver enhanced payment capabilities and related value-added services to fintech developers. Finally, the acquisition will enable Visa to work more closely with fintechs through all stages of their development and drive growth in Visa’s core business.”
Plaid’s products allow consumers to share their financial information with thousands of apps and services, including Acorns, Betterment, Chime, Transferwise, and Venmo.
“This acquisition is the natural evolution of Visa’s 60-year journey from safely and securely connecting buyers and sellers to connecting consumers with digital financial services,” Kelly said. “The combination of Visa and Plaid will put us at the epicenter of the fintech world, expanding our total addressable market and accelerating our long-term revenue growth trajectory.”
The deal is already receiving positive reviews from several sizable financial services companies.
“We believe Visa’s acquisition of Plaid is an important development in giving consumers more security and control over how their financial data is used,” said Gordon Smith, co-president, JPMorgan Chase and CEO of consumer and community banking. “Protecting customer data and helping them share that information safely has long been a top priority for Chase. We look forward to partnering with Visa to continue building a great experience for our shared customers.”
PayPal President and CEO Dan Schulman, meanwhile, stated: “We have strong relationships with both Visa and Plaid. The combination of Plaid’s capabilities with the security and scale of Visa’s global network will provide us with exciting opportunities to enhance our products.”
As for Plaid, the company said that the deal will allow the company to grow.
“Plaid’s mission is to make money easier for everyone, and we are excited for this opportunity to continue delivering on that promise at a global scale,” said Zach Perret, CEO and co-founder of Plaid. “Visa is trusted by billions of consumers, businesses and financial institutions as a key part of the financial ecosystem, and together Visa and Plaid can support the rapid growth of digital financial services.”
According to a release, Visa will use cash on hand and debt issuance “at the appropriate time” to fund this deal. The companies expect the deal to close in the next three to six months.
