Payment services firm Visa agreed on Tuesday to terminate the $5.3bn acquisition of portfolio company Plaid, a US-based provider of banking and financial data transfer software.
The deal was agreed in January 2020 and would have enabled internet and technology conglomerate Alphabet, financial services firm Citi and payment service providers Mastercard and American Express to exit.
However, the US Justice Department filed an antitrust lawsuit in November citing a threat to competition in the debit card market, and the companies decided to cancel the deal instead of fighting the suit.
Plaid has created an open banking platform that helps organisations build financial services applications for use by their customers, in areas such as personal finance management, lending, payments and wealth management.
Although the company’s investors may have missed out on a windfall through the cancellation of Visa’s purchase, it may prove to be a blessing in disguise, given the uptick in valuations in the fintech sector over the past year.
Zach Perret, Plaid’s co-founder and chief executive said: “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.
“We made great strides last year, growing our customers by more than sixty percent and adding hundreds of banks to our platform. 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.”
Visa and Mastercard supplied Plaid’s most recent venture funding, investing an undisclosed amount in the company in September 2019.
Venture capital firm Kleiner Perkins led Plaid’s $250m series C round a year earlier, participating alongside investment bank Goldman Sachs, New Enterprise Associates (NEA), Spark Capital, Andreessen Horowitz and Index Ventures at a $2.65bn valuation.
Goldman Sachs Investment Partners, American Express, Citi and NEA had provided $44m in series B funding for the company in 2016, the corporates’ participation only disclosed later on.
Plaid had secured an undisclosed amount in an NEA-led series A round the previous year, following a $2.8m seed round featuring Alphabet’s GV unit, NEA, Spark Capital, Felicis Ventures and Homebrew in 2013.
