Plaid Plans Ahead After Visa Terminates Acquisition Over Antitrust Lawsuit

Fintech startup Plaid looks forward to 2021 despite the termination of its merger agreement with Visa. Let’s take a closer look at what Plaid’s plans are going forward.

Plaid spent the entire 2020 preparing for a merger with Visa. However, as we enter 2021, Plaid is still moving alone, potentially with higher valuation and freedom from a giant corporation, which it may look at as a blessing in disguise.

Plaid’s Visa acquisition was announced in January 2020, but just weeks after the announcement, the pandemic struck, leading to a global economic crisis. The merger thereby hit road bumps. Later in November 2020, the Justice Department blocked the merger deal, which it viewed as an attempt by Visa to take out a rising competitor.

The successful merger with Visa would have meant an amalgamation of a rising star of the fintech revolution and one of the oldest guards in the financial services industry. However, Visa ditched the $5.3 billion dealOpens a new window  to avoid a “protracted and complex” legal battle with the Justice Department, it said last week.

As Plaid’s Visa acquisition was scuttledOpens a new window by Department of Justice (DOJ) antitrust lawsuit, a person close to Plaid said that “this event is like the most 2020 thing to happen to a little startup,”

Even after the acquisition failure, Plaid’s CEO and co-founder Zach Perret was unfazed by the eventual and seemed to be bursting with optimism, talking about the company’s plans to move forward at a laser speed. Yet, Plaid’s 600 odd employees were “definitely surprised” by the news that one of the biggest deals in fintech history was no longer happening.

“As we look to the future, we’ve never been more excited about what it holds for Plaid,” Perret said. “It’s going to be a very fun few years.”

Since Visa had agreed to buy Plaid, it meant the essential link between your bank account data and many of the favorite fintech apps (from Coinbase to Robinhood to Venmo) would be established. Considering this future development, the startup’s prospects soared in 2020. 

The pandemic brought about a significant shift in the way financial sector services are handled today. Finance’s center of gravity moved from the bank branch to the customer’s home, particularly phones. Plaid’s customer base swell about 60% in 2020, to more than 4,000 companies using its software (which included Fortune 500 players like PayPal and heavyweights like Square), as well as “hundreds of new banks”Opens a new window  connected to its network.

Zach Perret disagrees with DOJ’s read on Plaid and its relationship with Visa. Visa and Plaid say they now plan to move forward as partners instead of the acquisition. “We don’t see Visa as a competitor, nor does Visa see Plaid as a competitor,” said Perret. “Plaid does a lot of things that are payment-adjacent, but ultimately our business is focused on financial data.”

In the coming months, it’s highly likely that Plaid’s market value will increase even beyond the Visa deal’s price tag, though by what means remains an open question. Speculation around Plaid continues to make rounds about whether Plaid would go public via a SPACOpens a new window or special purpose acquisition company. However, Perret wouldn’t comment on whether he’s considering that or other listing options. And after the long dispute with the DOJ, it’s difficult to imagine either a potential acquirer for Plaid or the startup itself thinking about entering into an M&A deal in times to come. This implies Plaid will almost certainly seek outside venture funding in the immediate upcoming months.

Here’s what Plaid CEO @zachperretOpens a new window has to say about backing away from the Visa deal, potential SPAC plans, and whether he’s really building a Visa-rivaling payments platform. Today’s @FortuneLedgerOpens a new window

— Jen Wieczner (@jenwieczner) January 13, 2021Opens a new window

According to Mary Meeker, a renowned internet investor who led Plaid’s most recent funding round in late 2018 (and now heads new venture firm Bond), raising money now shouldn’t be much of a problem for Plaid. She further confirmed her continuing interest in a statement: “We are confident in Zach and the team’s ability to lead Plaid as the digitization of finance continues,” she wrote, “And we support the company’s decision to pursue an independent path in order to fully realize the potential ahead.”

Plaid’s Future Plans

Despite scrapping the Visa deal, Plaid continued to move on in 2021 with an even stronger zeal. Plaid has now officially launchedOpens a new window an incubator program, FinRise, to support early-stage entrepreneurs.

The idea of FinRise dates back to an internal ‘hackathon’ conducted in summer 2020 and was inspired by the Black Lives Matter movement. The idea was charted out after the initial concept and months of planning. FinRise was finally launched to be a nine-month program designed to empower early-stage founders who are black, indigenous, or people of color.

“Entrepreneurship should be accessible. Anyone with a great idea should have access to the same opportunities and resources to be successful,” said a blog regarding FinRise on Plaid.com. “At Plaid, we believe in technology as a force for good. We want to unlock financial freedom for everyone by empowering entrepreneurs and innovators. We want to create a fintech ecosystem that consists of more voices rather than fewer.”

Another significant development that Plaid plans to achieve in 2021 is to double its European workforce. Plaid toldOpens a new window CNBC that it has already picked up a certain number of clients in Europe, including the U.K. money management apps Curve and Cleo. The firm iterated that it faces stiff competition from many smaller European players, including Tink, TrueLayer, and Yapily, which are determined to utilize the new fintech-friendly rules in Britain and the EU for their benefit.

According to Plaid, it currently employs 40 people across its London and Amsterdam offices, with another ten internationally-focused staff also working out of the U.S. With a global headcount of around 600, the company aims to have 100 local European employees at the firm by the end of 2021.

The company has its global presence as it operates from the U.S., Canada, the U.K., Ireland, Spain, France, and the Netherlands. With 2021 plans in place, the firm’s further expansion across Europe is “definitely on the cards,” Keith Grose, Plaid’s head of international, told CNBC.

In conclusion

Though Visa abandoned the takeover of Plaid about two months after the DOJ filed an antitrust lawsuit against the Silicon Valley startup, Plaid has moved on quickly from the jolt. Plaid has already launched FinRise, an incubator program along with plans to increase to European employees across its offices. Plaid garnered attention immediately after the Visa acquisition news, which means Plaid’s market value may increase even beyond the Visa deal’s in upcoming months.

Do you think Plaid’s fallout with Visa will affect its future? Comment below or let us know on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to hear from you!