Visa acquires fintech start-up Plaid for $5.3bn

Plaid turns $310m in venture funding into a tidy $5bn profit for backers of 2013 fintech start-up

Visa has acquired US fintech start-up Plaid in a $5.3 billion deal - an exceptionally healthy return on the $310 million invested in the company through seed, Series A, Series B and Series C funding.

The company specialises in APIs that can connect account holders to 'clean' banking data, enabling developers to build applications for accounting, automating taxes and expense management, and to perform more in-depth analytics on bank and bank account data.

"Plaid's API essentially serves as the connector between banks and fintechs," explained Inc. Magazine. Back in 2017 it labelled Plaid as one of ‘Six Fintechs Disrupting the Industry'. The company's API has been adopted by various financial outfits, including Venmo, TransferWise, Level Money and Gusto.

The company claims that some 200 million accounts - largely in the US - are now linked to its platform. One-in-four US consumer bank accounts have used Plaid to connect to one or more apps, it adds. Visa is planning to use its international presence to take Plaid into the European market and other markets internationally.

Visa is paying for the acquisition from a combination of cash-in-hand and debt issuance.

Al Kelly, CEO of Visa, claimed to be "extremely excited" about the deal. "The acquisition, combined with our many fintech efforts already underway, will position Visa to deliver even more value for developers, financial institutions and consumers," he said.

Kelly added that the acquisition would put Visa "at the epicentre of the fintech world, expanding our total addressable market and accelerating our long-term revenue growth".

Plaid was backed by Spark Capital, Google Ventures, New Enterprise Associates, Goldman Sachs, American Express and Citibank in seed funding through to its Series B financing. Its last round of funding in December 2018 raised $250 million from Mary Meeker, Andreesen Horowitz and Index Ventures, valuing the company at $2.65 billion.

Visa's main rival network Mastercard also contributed to the Series C funding round. That, and the price paid, indicates that Plaid was the object of a bidding round between the two well-funded organisations.

It's not the first major acquisition of fintech by Visa, with the company acquiring Germany's PayWorks in July 2019.