Visa's Planned Purchase of Plaid Faces Antitrust Scrutiny at the Justice Department -- Update
By AnnaMaria Andriotis, Brent Kendall and Peter Rudegeair
Visa Inc.'s $5.3 billion deal to buy a key player in the
financial-technology space is in jeopardy because of antitrust
concerns, according to people familiar with the matter.
The Justice Department could decide soon whether it will sue to
block Visa's acquisition of Plaid Inc., a firm that provides the
technological infrastructure underpinning an array of
next-generation financial apps. After spending the better part of
the year scrutinizing the deal, the department is concerned it
could limit nascent competition in the payments sector, people
familiar with the matter said.
The Justice Department has been making preparations for
potential litigation, including lining up potential witnesses for a
trial, some of the people said. No final decision has been
Spokespeople for Visa, Plaid and the Justice Department declined
Plaid has been viewed by fintech companies and merchants as a
platform that could one day enable consumers to make purchases
without having to rely on debit and credit cards. The San
Francisco-based startup has said it provides connections between
more than 11,000 banks and financial-services companies and more
than 200 million consumer accounts.
Visa, which announced the planned acquisition in January, is the
largest U.S. card network, handling $2.2 trillion of credit, debit
and prepaid-card transactions during the first half of 2020,
according to the Nilson Report, a trade publication. Its closest
competitor, Mastercard Inc., handled $942 billion in card
transactions during the same period.
Visa initially said it expected the Plaid acquisition to close
by the summer, pending regulatory approval. In the summer, Visa
said it was expecting to close by the end of the year.
Plaid makes software that allows banks and fintechs to plug into
consumers' various financial accounts, enabling those companies,
with users' permission, to aggregate spending data, look up
balances and verify other personal financial information. Its
clients and partners include Venmo, the digital money-transfer
service owned by PayPal Holdings Inc.; stock-trading app Robinhood
Markets Inc.; and mortgage-software startup Blend Labs Inc.
Visa and Mastercard have been concerned about getting left
behind if more people change how they make payments and use apps
that, for example, enable bank-account-to-bank-account payments
that essentially bypass the card networks. Both companies have been
buying firms in recent years that enable new types of payments.
Merchants, meanwhile, have been hoping that fintech companies
such as Plaid would eventually help facilitate these new types of
payments. That could allow merchants to avoid the swipe fees that
are set by networks such as Visa and Mastercard, which have long
been a point of contention.
Plaid doesn't currently operate a payments network like Visa's,
but Plaid's software can see if a consumer is the owner of a given
bank account and can look up how much money is in that account.
The Justice Department has recently placed new emphasis on
antitrust enforcement in the financial sector. The department's top
antitrust official, Makan Delrahim, in August announced a shake-up
of internal operations to improve how the department evaluates
financial-sector competition, saying the government needed to "take
a fresh look" at how new technologies are changing competitive
dynamics in the financial-services industry.
The Justice Department has spoken with merchant trade groups,
people familiar with the matter said. It also has spoken with
companies that work with Plaid, including PayPal; Stripe Inc.,
which allows internet companies to accept credit cards; and
cryptocurrency exchange Coinbase Inc., according to people familiar
with the matter. PayPal was an early investor in Plaid.
Some of those interviewed told the department they were worried
the acquisition could harm fintech companies' ability to provide
services, including limiting their ability to interact with banks
on behalf of customers, those people said.
Write to AnnaMaria Andriotis at email@example.com,
Brent Kendall at firstname.lastname@example.org and Peter Rudegeair at
(END) Dow Jones Newswires
October 27, 2020 13:38 ET (17:38 GMT)
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