Visa, Plaid Scrap $5.3 Billion Deal Amid US Antitrust Suit
Jan 15 2021
On Tuesday Visa and Plaidmutually agreed to terminate the proposed merger. The department claimed that Visa was a "monopolist in online debt services", and its acquisition of Plaid would unlawfully maintain that monopoly. The US Department of Justicefiled a suit to block the deal, declaring that the tie-up would stymie competition in the market and lead to a negative impact on choice and value for merchants and consumers.
Banks and startups use the technology Plaid built to access consumer financial data. In 2019 Visa's revenues were about $23 billion.
The DOJ said in a statement Tuesday that termination of the merger was "a victory for American consumers and small businesses". With trial scheduled for June, President-elect Joe Biden's Justice Department would have been responsible for prosecuting the case. "Now that Visa has abandoned its anticompetitive merger, Plaid and other future fintech innovators are free to develop potential alternatives to Visa's online debit services".
Visa denied the assessment, arguing that it "reflects a lack of understanding of Plaid's business" on the part of the DOJ. American consumers and business owners rely on the internet to buy and sell goods and services, and Visa - which has vast power in online debit in the United States- has extracted billions of dollars from those transactions. Set against the context of the coronavirus pandemic and the banking sector's rapid embrace of digital interaction, the startup's CEO and co-founder Zach Perret said "hundreds of banks" also joined the platform in 2020. "With the rollout of the vaccine underway, we have increasing confidence in an eventual worldwide travel recovery, which we believe will drive the stocks in 2021 as a more normalized earnings stream in 2022 and 2023 becomes discounted by the market", he wrote in upgrading Visa and Mastercard shares to buy from hold. As a company, and as an industry, we have an urgent responsibility to stay focused on delivering the products and services on which consumers rely. The past year has been one of exciting growth for Plaid.