VISA MOVES TO ACQUIRE PLAID AND OTHER BANKING APPS IN A $5.3 BILLION DEAL

Payment giant, Visa announced in a statement on Monday (Jan. 13), that the company has made a move to acquire Silicon Valley startup, Plaid. This is a deal that is worth $5.3 billion.

Plaid's API software is often referred to as the 'plumbing' behind finance tech companies, and this software allows users to connect to their bank accounts. The software application is well known to financial technology developers. Plaids have a number of 'high profile' customers. These ' high profiles' Plaid customers include popular peer-to-peer payment app- Venmo, mobile investing app- Robinhood and cryptocurrency exchanges -Coinbase and Gemini.

Plaid said in December 2019, that one in four people in the United States with bank accounts have connected to the fin-tech company through an app. Plaid had a number of early investors, comprising of Visa and its rival, Mastercard, along with the venture arms of Citi and American Express.  According to a source familiar with the on-going negotiations, Goldman Sachs was the exclusive advisor on the deal. Goldman Sachs was also an early investor of Plaid.

Following the launch of a 2018 series C funding round, plaid was able to raise the sum of about $250 million. This launched its valuation to $2.7 billion. The company also added Mary Meeker (a widely followed venture capitalist) to its board of directors.

In a call with investors on Monday (Jan. 13), CEO of Visa, Al Kelly said Plaid since 2015 has seen a compound annual growth rate of roughly 100%. Kelly stressed that the deal was a “long-term” play and would position Visa for the next decade. It will help expand the company’s own total addressable market and relationships with Fintech companies, as well as boost Plaid’s growth. Regarding the acquisition, Kelly said, “This fits well, strategically. We’re excited about new businesses and the ability for this to accelerate our revenue growth over time.” A disclosure by Visa said the deal has the potential to add as much as 100 basis points to the company’s net revenue growth by 2021.

Since its launch in 2013, Plaid has grown steadily with its list of customers. The company said it integrates with more than 11,000 banks and connects to more than 20 million consumer accounts. Even though the company did not give a comprehensive list of its client companies and exact number, Plaid said its customer base has doubled from 2017 to 2018 and has expanded to the U.K. and Canada.

In an interview with CNBC, CEO of Plaid, Zach Perret disclosed that the Plaid team got to know Visa through its initial strategic investment, which was a “jumping off point for a series of conversations” leading up to the deal. Perret further said that the brand would help Plaid to scale through its products and global footprint. 

In a telephone interview, Perret said,  “We feel fortunate to have been there for the early days of Fintech, and to have helped develop that ecosystem. This represents an important milestone, and the ability to work with Visa to make our products much bigger and better, both domestically and internationally.”

Brief Overview of Visa

Visa Inc. is an American multinational financial services corporation that is headquartered in Foster City, California, United States. Visa facilitates the electronic transfer of funds around the world through the use of its Visa-branded credit, debit and prepaid cards. The organization does not issue cards, extend credits or set rules and fees, rather it provides financial institutions with Visa-branded payment products which will subsequently be used to offer credit, debit prepaid and cash-access programs to customers. A 2015 report by the Nilson revealed that Visa's global network (VisaNet) processed 100 billion transactions in 2014 with a volume of US$6.8 trillion.

Visa operates across all the continents of the world, and its transactions worldwide are processed through the company's directly-operated VisaNet at one of four secure data centers located in Ashburn, Virginia; Highlands Ranch, Colorado; London, England, and Singapore. These facilities are reportedly heavily secured against natural disasters, crime and terrorism; and can operate independently of each other, handling about 30,000 transactions simultaneously.

Based on the annual value of transacted card payments and the number of cards issued, Visa is the world's second-largest card payment organization, after being surpassed by China's UnionPay in 2015.

Before October 2007, Visa was a composition of four non-stock, separately incorporated companies that had over 6,000 employees worldwide. The worldwide parent entity include Visa International Service Association (Visa), Visa USA Inc., Visa Canada Association, and Visa Europe Ltd. The remaining three separately incorporated regions had the status of group members of Visa International Service Association. The unincorporated regions Visa Latin America, Visa Asia Pacific and Visa Central and Eastern Europe, Middle East and Africa (CEMEA) were divisions within Visa. 

Visa's IPO

Visa announced on Oct. 11, 2006, that some of its businesses would be merged to become a publicly-traded company, Visa Inc. In the IPO restructuring, Visa Canada, Visa International, and Visa USA were merged into the new public company, while the Visa Western Europe operation became a separate company, owned by its member banks who will also have a minority stake in Visa Inc. In total, more than 35 investment banks participated in the deal in several capacities, most notably as underwriters. 

Visa completed its corporate restructuring on October 3, 2007, with the formation of Visa Inc.; the first step towards it IPO. The second step came on November 9, 2007, when the new Visa Inc. submitted its $10 billion IPO filing with the U.S. SEC. On February 25, 2008, Visa announced it would go ahead with an IPO of half of its shares. On March 18, 2008, the IPO took place. The company sold 406 million shares at US$44 per share and raised US$17.9 billion in the largest initial public offering in U.S. history.

 Visa trades under the ticker symbol 'V' on the New York Stock Exchange.

Brief Overview of Plaid

Plaid, a financial technology company based in San Francisco, builds a technology platform that enables applications to connect users with their bank accounts.  Plaid enables customers and businesses to interact with their bank accounts, check credit balance and make payments through the app.

Plaid was founded by Zach Perret and William Hockey in 2013. The company announced a Series C round with a valuation of $2.65 billion. The funding was headed by Mary Meeker and a host of other investors.

On Jan 13, 2020, the news of Plaid being acquired by Visa at $5.3 broke.