Visa Inc. wants in on the largely untapped international market around securely sharing consumers' financial data.
The payment processing company agreed Jan. 13 to acquire financial technology startup Plaid Inc. in a $5.3 billion deal, marking one of its largest purchases ever, according to S&P Global Market Intelligence data. The deal is expected to close in the next three to six months, Visa said.
By acquiring Plaid, Visa is pushing into the burgeoning market around sharing consumer financial information across institutions safely. Plaid provides a range of companies, including Acorns Grow Inc., Goldman Sachs Group Inc. and PayPal Holdings Inc.'s Venmo LLC, with the technology to allow their clients to connect and share their financial data through certain applications and services. In total, one in four people with a U.S. bank account have used Plaid, Visa said.
"We are increasingly trying to move from being strictly focused on client payments to focused on the movement of funds for any purpose around the world," Visa Chairman and CEO Al Kelly said Jan. 13 on a call to discuss the deal with analysts. "As it relates to the actual movement of money, we would like for as much of that to happen on the Visa network as possible."
The acquisition comes a little more than a year after Visa first invested in Plaid as part of its late 2018 series C round, which valued the startup at $2.65 billion. Alongside Visa, rival Mastercard Inc. was also involved in that offering.
Plaid will take Visa's push beyond client payments one step further, an effort that began around the same time that Visa invested in Plaid. In early 2019, Visa was caught in a bidding war with Mastercard for U.K.-based cross-border payment provider Earthport PLC, which it eventually acquired in May 2019.
Visa expects its global reach will help expand Plaid into new markets, though its executives did acknowledge that the startup has already successfully launched in certain international markets like the U.K. and Canada. In a presentation, Visa specifically noted that Plaid currently only addresses about 5% of the North American banking and investing industry, a total addressable market it estimates to be about $650 million. Of the $1 billion total addressable lending market, Plaid has a 2% penetration rate.
"This is about positioning Visa for the next decade," Visa CFO Vasant Prabhu said on the call. "We see this as a massive expansion in our total addressable market with a new set of products and services."