On Jan 13, 2020, Visa Inc. announced that it would acquire fintech startup Plaid Inc. for $5.3 billion, including $4.9 billion of cash consideration and the remaining in retention equity and deferred equity. Plaid (www.plaid.com) was valued at about $2.65 billion in a late 2018 private funding round.
Plaid’s technology platform enables consumers to conveniently share their financial information with thousands of apps and services such as Acorns, Betterment, Chime, Transferwise and Venmo. For example, when a user sets up a Venmo account, it is actually Plaid technology that enables the user to link their bank account to their Venmo account.
Triumph for Plaid investors
According to TechCrunch, Plaid’s exit price is a triumph for its investors, who invested a combined $353.3 million into the fintech startup. A $250 million infusion came in late 2018 at a valuation of $2.65 billion. Hence, Visa paid twice this 2018 valuation for Plaid.
The FinTech Revolution
Visa’s acquisition is seen as part of an effort by the card giant to tap into consumers’ growing use of financial-technology apps and noncard payments. According to the EY Global FinTech Index, 75 percent of the world’s internet-enabled consumers used a fintech application to initiate money movement in 2019 versus 18 percent in 2015. 96% of consumers worldwide know of at least one alternative FinTech service available to help them transfer money and make payments.
Plaid has been a leader in enabling this connectivity at scale. One in four people with a U.S. bank account have used Plaid to connect to more than 2,600 fintech developers across more than 11,000 financial institutions.