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 made.

Spokespeople for Visa, Plaid and the Justice Department declined to comment.

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 annamaria.andriotis@wsj.com, Brent Kendall at brent.kendall@wsj.com and Peter Rudegeair at Peter.Rudegeair@wsj.com

 

(END) Dow Jones Newswires

October 27, 2020 13:38 ET (17:38 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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