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Visa and Plaid Abandon Merger After Antitrust Division’s Suit to Block
- nawgz 6y agoI think this was well played by the gov't, the idea of Visa and Plaid merging is really clearly going to reduce competition in the payments space
- paxys 6y agoIt would have gone through had Visa's CEO not been so honest at the time of the merger announcement saying that they intended to use Plaid's data to get a leg up on their competitors. > The DOJ cited Visa CEO Al Kelly’s description of the deal as an “insurance policy” to neutralize a “threat to our important US debit business.”
- CamelCaseName 6y agoSuch a poor comment from Kelly that I almost wonder if it was intentional.
- ska 6y agoIt would seem a CEO would have other, less public, tools to torpedo a deal if they wanted to, no?
- vlovich123 6y agoMaybe not if the board was forcing him?
- mjevans 6y agoThis angle makes sense if they wanted regulators to more closely examine the acquisition target.
- renewiltord 6y agoCould be attempting a balance of convincing shareholders and not come out as just eating the upstart.
- Dwolb 6y agoMaybe he wanted to tank the deal once they figured out Plaid scrapes financial portals instead of integrates with them.
- chishaku 6y agobecause you sign a 5b deal and then do due diligence
- Dwolb 6y agoYes? There are several iterations to deals that size with increasing levels of scrutiny.
- hntrader 6y agonot exactly the same situation but it happened with NKLA and GM, insufficient due diligence on what was vaporware. mistakes like that can happen.
- skinnymuch 6y agoThat’s not the same at all. GM wasn’t losing anything in their original NKLA deal. While Visa would have spent billions.
- dexterous 6y agoHubris enables people, especially "smart" people, to do things that look really stupid in hindsight.
- odiroot 6y agoBut is it securities fraud?
- matt_kantor 6y agoEverything is securities fraud. https://www.bloomberg.com/opinion/articles/2019-06-26/everything-everywhere-is-securities-fraud https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...
- chaorace 6y agoI don't even think it's a data issue. He literally says they bought Plaid because they're a threat. That's textbook anti-competitive behavior and a big smoking gun when it comes to anti-trust cases.
- paxys 6y agoThey said both I believe. Them having access to all their competitors' data through Plaid was a big concern when the acquisition was announced.
- valtism 6y agoI'm not informed when it comes to anti-competitive legislation, but don't companies like Google do this sort of thing all the time?
- paxys 6y agoThey do, which is why it is so surprising that the DoJ is being so aggressive with this one.
- totalZero 6y agoYes, and they didn't invent the practice. Standard Oil brought competitors into its fold in order to maintain its pricing power and dominate the petroleum market. As with most questionable business practices, they're not wise to be transparent about their true reasons for doing it, and inevitably they admit to their true reasons anyway.
- chaorace 6y agoI'm a layman, so take this with a grain of salt, but here's the basic legal theory... In antitrust law, intent matters. If your primary motivating intent is to make the market less competitive, that's what gets the book thrown at you. That's why it can be so hard to prosecute antitrust, because it's pretty easy to lie your way out as long as there's no direct proof of intent. Let's take Facebook's acquisition of Instagram. Did they buy Instagram because they saw Instagram as a threat, or did they buy Instagram because they wanted to acquire their talent and improve their product? For a long time, you could argue it was the latter case, which warded off antitrust suits. Recently, some emails came to light where they explicitly talked about taking out Instagram because they were beginning to pose a threat. Now there's a smoking gun and a strong case to be made, which may well be prosecuted in the near future.
- etaioinshrdlu 6y agoMaybe they weren’t as astutely aware of the antitrust political wave we seem to be in. It feels like 5 or 10 years ago this merger would have happened regardless of comments like this. I think after the 08 recession there was little appetite for anything that could make business less effective, and big business loves mergers.
- pjg 6y agoOK. But will DoJ disallow the acquisition of finicity by Mastercard ? VISA and Mastercard follow each other. I'm waiting to hear the verdict on finicity acquisition by MC
- breck 6y agoI'm surprised by this. I used to work in Foster City. The joke on the campus was that VISA stood for "Very Inconspicuous Spy Agency". You'd think that there wouldn't be this kind of miscommunication in the chain of command. All jokes aside, I'm very curious to check out Plaid now because I didn't pay attention when it was independent and Visa is a *very* smart organization, so Plaid must be something special.
- ryanwhitney 6y agoIt’s like oauth except you type your password for site A into a box on site B’s domain Pretty wild it even exists
- toomuchtodo 6y agoIt is a hack around regulatory failure to mandate this functionality at finance firms (both Congress and the Fed have failed in this regard). The Fed's instant payments product (FedNow [1]) goes live in 2023, which is going to put downward pressure on Visa's debit business. The Fed only began to move on instant payments when pressured by Congress [2] (who didn't want smaller banks held hostage by Early Warning System's "Zelle" product, which is operated by a consortium of the nation's largest banks). Europe mandated this functionality (PSD2) [3]. With instant payments and if regulations required banks to offer this functionality, Plaid's value would evaporate. [1] https://www.frbservices.org/financial-services/fednow/index.html https://www.frbservices.org/financial-services/fednow/index.... [2] https://www.paymentsjournal.com/timeline-the-feds-real-time-payments-announcement/ https://www.paymentsjournal.com/timeline-the-feds-real-time-... [3] https://en.wikipedia.org/wiki/Payment_Services_Directive https://en.wikipedia.org/wiki/Payment_Services_Directive
- runako 6y agoDoes FedNow solve all of the problems Plaid solves? I'm thinking specifically about Plaid functionality that lets consumers expose transaction history, investments, etc. It would appear that FedNow solves for "How do I get money into my Schwab brokerage account?" but not "How can I let Schwab do risk analysis across all my investment accounts?"
- jamestimmins 6y agoWhatever you think about Visa or this merger, this would be a major disappoint to Plaid's team members who thought they were in for a huge financial windfall. If that applies to anyone here, my sympathies and best of luck figuring out what's next for Plaid. Hopefully the morale hit isn't too big on the team.
- deleted 6y ago[deleted]
- hnxs 6y agoI wonder if employees with equity will see any portions of the breakup fees as some sort of bonus.
- perpetualpatzer 6y agoWas there a breakup fee on this one? I'd expect it's pretty standard to waive that when it's due to unforeseen regulatory obstacles.
- deleted 6y ago[deleted]
- paxys 6y agoThey'll get some $$$ out of it, and I have no doubt that they have a solid future as an independent company. The fintech sector is red hot right now. Heck they might even be able to catch the next IPO wave.
- RobRivera 6y agoSPAC SPAC SPAC SPAC SPAC
- monkeydust 6y agoNot sure why that was downvoted, there is a glut of funded SPACs and more on horizon who would love to take Plaid public.
- borski 6y agoThat breakup fee is good $$$ though
- andjd 6y agoThat Visa isn't fighting this should validate that the government's antitrust enforcement has been lax. For a merger valued in billions of dollars, hiring even the best lawyers for a long fight would have been a rounding error. The only way this happens is for Visa's lawyers to think that the government would likely win.
- PragmaticPulp 6y agoIt is strange that they're not fighting it harder. I wonder if Plaid identified a better exit strategy? Or if Visa is having some buyer's remorse over the $5 billion price tag and saw this as an easy out?
- carlineng 6y agoWith public market valuations of B2B companies today, I could see Plaid being worth considerably more than the $5 billion that Visa agreed to. I think it's less likely buyer's remorse than just overwhelming evidence of anticompetitive behavior. The original DOJ complaint [1] has a lot of direct quotes from top level Visa execs. See paragraphs 9 and 10. [1] https://www.justice.gov/opa/press-release/file/1334726/download https://www.justice.gov/opa/press-release/file/1334726/downl...
- dexterous 6y agoNo, they always knew the 500x valuation was BS. It's pretty much like they said, it was a defensive acquisition to prevent the data from going to any of their closest competitors. Visa had no idea what it was going to do with the data, but just wanted to keep it out of everyone else's reach.
- vinhboy 6y agoIt is still called a "merger" if one company is buying out another company. Don't we normally call that an acquisition?
- deleted 6y ago[deleted]
- nceqs3 6y agoThere is no legal process of an "acquisition". When somebody says acquisition they really mean reverse triangular merger. See https://witnesseth.typepad.com/blog/reverse-triangular-merger.html https://witnesseth.typepad.com/blog/reverse-triangular-merge...
- kemitchell 6y agoNot all acquisitions get structured as reverse triangular mergers. Not all acquisitions involve purchase of capital stock. Lawyers refer to the field as "mergers and acquisitions" or "M&A" for short. A good bit of what good M&A lawyers do is navigate the various operational, strategic, tax, and other factors to find an optimal structure. Often, buyer and seller won't agree, as because stock and asset purchase carry different tax implications, and have to negotiate structure as part of a broader deal with potentially offsetting concessions. Usage of "acquisition" and "merger" varies between lawyers, managers, and finance people. But it also varies among lawyers, and between states' laws. I'd recommend you just say "M&A". And try to stay out of the Delaware Court of Chancery.
- itsnot2020 6y agoWell as both a Visa card user and Plaid customer I suppose I'm happy about this!
- wh-uws 6y agoFinally some antitrust enforcement! This was clearly going to be anti competitive and bad for consumers. Plaid has a great product and will either spac / ipo or be a great acquisition target for someone else.
- thiscatis 6y agoLooking at this from an opionated Open Banking side here in the UK, this is a good thing.
- runako 6y agoWould be Stripe's largest acquisition to date, but their private market valuation would make it affordable if paid for mostly with stock.
- bnchrch 6y agoFinicity is already a great alternative to Plaid. I imagine bottles of champagne are popping at Mastercard HQ right now.
- exinuit 6y agoWhich is crazy because Fincity bought Intuit's Aggregation engine (Customer Account Data - that intuit launched back @ Finovate 2012-ish) - so the block wasn't because of account aggregation and more for Plaid's comments towards making a alternative payment platform that would compete with VISA. Either way all aggregators use screen-scraping when they can't get a direct connection, because banks are slow and protective of "their" data (which is really YOUR data) it's a constant tug of war.
- ChrisArchitect 6y agoGuess this is related: Plaid blog post 'The Year Ahead' https://plaid.com/blog/the-year-ahead/ https://plaid.com/blog/the-year-ahead/ (https://news.ycombinator.com/item?id=25754256 https://news.ycombinator.com/item?id=25754256)
- d33lio 6y agoIt blows me away our legal system can prevent this but not a tech social media plutocracy?
- lovecg 6y agoBaby steps.
- kemitchell 6y agoCan? Sure. Motivated to do so? Not a given.
- theonlybutlet 6y agoGlad to see they're starting to flex that antitrust muscle a little bit, it's been atrifying over the past few decades.
- anonu 6y ago* atrophying But yes, and this is a taste of what's to come. FB, GOOG, AMZN... watch out.
- sshah1983 6y agoMy guess is that that Plaid will go public via a SPAC deal now. I think it's highly likely GSAH (Goldman Sachs Acquisition Holdings) is that SPAC that does a deal. They have $750M to play with and given Visa was going to buy Plaid for $5.3B, the numbers kind of make sense.
- ashraymalhotra 6y agoImportant to note that there is no break-up fee that Visa (or Plaid) will pay. Source: https://www.bizjournals.com/sanfrancisco/news/2021/01/12/visa-ends-its-5-3-billion-bid-for-fintech-plaid.html https://www.bizjournals.com/sanfrancisco/news/2021/01/12/vis...
- anonu 6y agoNice pt. This is common as merger deals typically have MACs that carve out specific events like failure to get antitrust approval...
- seanieb 6y agoI’ve some friends that works there, so I’m hesitant to say this, because I’m sorry for them, but Plaid is a terrible company. Their main product scrapes financial data from unsuspecting users that simply think they’re making a bank transfer and not signing away the privacy and security of their banking, 401k and trading information. https://twitter.com/seanieb/status/1298871471645761537?s=20 https://twitter.com/seanieb/status/1298871471645761537?s=20
- xvector 6y agoI can't wait until we have smart contracts on a privacy coin that let me invest and grow my wealth anonymously.
- hahaxdxd123 6y agoAnonymously is unlikely - how would the government get their taxes?
- xvector 6y agoEven if the government bans XMR from exchanges, BTC to XMR atomic swaps are coming. You can then 1. Use XMR as an anonymizing bridge to pseudonymous ETH or ADA wallets 2. Grow wealth with ETH or ADA smart contracts/decentralized finance 3. When you want to spend, transfer funds from your ETH/ADA wallets over the XMR bridge to newly generated spend wallets. (There's potential for a chain-analysis correlation attack at this point if you aren't careful with how you are withdrawing.) --- Really, it's all a nightmare and very difficult to do it now, but I'll be damned if someone doesn't develop an app or program that does this all seamlessly in a few years.
- cblconfederate 6y agowhat if tax is part of the smart contract?
- tyre 6y agothen it would have to know who it is taxing? The same applies. No, you cannot anonymously tax every transaction at some rate. Tax rates don't work that way, in a vacuum.
- purple_ferret 6y agoYet Intuit was able to shut down Credit Karma's potential as a competitor with ease. Something fishy in the district of Washington.
- dexterous 6y agoWell, Intuit showed a little restraint and didn't offer to pay an obscene price for Credit Karma. :)
- kregasaurusrex 6y agoThere's a decent bit of M&A activity going on in finanacial services lately- SoFi recently announced going public, Simple being dissolved after BBVA merging with PNC, Lending Club merging with Radius Bank, and now Plaid's merger termination with Visa. Lots more demand exists for building fintech tools, since significantly more transactions that would normally take place in-person have moved towards being online due to the pandemic. It makes a lot more sense for the whole ecosystem to move towards being data-driven and API-friendly both for consumers to to have less friction between services, and for businesses to deliver a better customer experience. Having the merger fall through is probably better on all sides such that one corporation doesn't retain too much power and act as monopolistic gatekeeper driving up fee prices. Also, wanted to say thanks to Zach for doing a Fireside Chat with Lambda School students last month! It's great to hear from your perspective about industry knowledge & experience in order to prepare for a career in tech.
- desireco42 6y agoI am surprised Plaid is a business. It is a bunch of scripts of dubious security. How businesses are coming on board with that is worrisome. On the other hand, if we could have standard API and let people integrate services, totally welcome that. But let's not pretend this is anything like that. If you know something more, please educate me.
- themacguffinman 6y agoConsider it market proof of how much demand there was for API integration that this suboptimal hack was viable. "Proper" APIs will follow; For example, Fidelity built a proper system (Fidelity Access) in response to all the screen scraping. The Fed is now also standardizing some kind of API I think.
- desireco42 6y agoThat is what I mean. They have investors, if business model is such that can disappear in few year, what is the point of investing in them.
- whatsmyusername 6y agoI'm not exactly surprised. Plaid is the worst of both worlds, a janky ass tech that's just waiting for the first major security breach to cause a huge problem for their users combined with the fact that they're the only real choice in the space. I do 90% of my transactions through CC partially because Visa/Mastercards tech is at least within the last decade (ex: Visa rails) as opposed to the debit networks. That combined with the added consumer protections you get from using CC over debit makes it a no brainer.
- alexfromapex 6y agoCould even break those companies up further, at least Visa since financial censorship is becoming prominent with their monopoly share of the market
- kevas 6y agoTheir link to delete data for CA residents: https://plaid.com/legal/data-protection-request-form/ https://plaid.com/legal/data-protection-request-form/
- nceqs3 6y agoPlaid acquired a direct competitor Quovo in 2019 for $200m. I am sensing a trend. https://www.businessinsider.com/plaid-acquires-quovo-2019-1 https://www.businessinsider.com/plaid-acquires-quovo-2019-1
- 74639497 6y agoI gave them access to my bank via coinbase. If I change my bank password would they lose access to my account? If not, what do I need to do to make Plaid lose my banking access?
- doikor 6y agoWait you actually login to a bank using a password? It’s all single use codes from a booklet or two factor application here in Finland (and has been for decades now) (And the two factor is the kind where you input a pin code every time)
- esotericimpl 6y agoYes, they will lose access.