Wednesday, February 8, 2023

Why investors are thrilled to see the Plaid and Visa merger die

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Visa and Plaid agreed to end their $ 5.3 billion deal on Tuesday night.

About a year ago, Visa announced plans to acquire the fintech company, announcing a series of fintech deals. But late last year, the Justice Department filed a lawsuit to block the acquisition, alleging the credit card company was looking to crush potential competition in its Plaid deal. And while Visa says she believed she could defeated the trial, the two companies have decided to separate.

The venture capital community has exploded into a frenzy of speculation about Plaid’s next move. One of the most vibrant fintechs, after all, was back on the market. Would he be looking to go public via a merger with another hot topic at the moment, a special purpose acquisition company (here’s a tweet on the subject)? According to my colleague Jen Wieczner’s report, Plaid is looking to go it alone.

“Without Visa’s backing, Plaid will likely seek to raise a new wave of venture capital in the coming months, according to a person close to the company,” she reports.

Sure TwitterPlaid board member Mark Goldberg also referred to the company’s high ambitions after the split. “Exciting news to share today – Plaid remains independent,” he wrote, adding what appeared to be a reference to the price at which Visa acquired Plaid: “The opportunity here is $ 50 billion and not of $ 5 billion. “

It’s a good time for fintechs, after all. Ironically, the DoJ lawsuit blocking the deal was perhaps the most bullish case for the future of Plaid in clear terms. This implied that Plaid could issue a direct challenge against Visa. Yes, at the moment, Plaid allows financial apps to be connected to consumers’ bank accounts, but in the long run, Plaid could disrupt the debit card market and reduce transaction costs. After learning about the Plaid plans, the CEO of Visa then issued the opinion, according to the DoJ: “[Plaid was] clearly, alone or owned by a competitor, this will create a threat to our significant debit business in the United States. “

BET ON RETURN FROM TRIP: While the Visa and Plaid merger deal is dead, fintech startups continue to consolidate by 2021. The payment company Wednesday Rapyd announced it has raised $ 300 million in Series D funding led by Coatue. Investors such as Spark Capital, Avid Ventures, FJ Labs and Latitude have also joined the round. According to CEO Arik Shtilman, 30% to 40% of those profits will go to mergers and acquisitions.

The fintech space, he says, still needs consolidation. Meanwhile, the pandemic has shifted the market. “The pandemic has created opportunities to invest in [for example] businesses exposed to travel… or restaurants and shops, ”he said. “We believe the physical world will come back. And come back big.


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