The US Department of Justice claimed Visa’s $5.3bn acquisition of the fintech start-up would ‘increase entry barriers for future innovators’.
The Department of Justice in the US is attempting to block Visa’s $5.3bn planned acquisition of fintech start-up Plaid, citing competition concerns.
Yesterday (5 November), the department filed a civil antitrust lawsuit that said the deal would eliminate a “nascent competitor”. It described Visa as a “monopolist in online debit services” and said that Plaid is developing a payments platform that would challenge Visa’s position.
“Visa is attempting to acquire Plaid, a nascent competitor developing a disruptive, lower-cost option for online debit payments,” said Makan Delrahim, assistant attorney general at the Department of Justice’s antitrust division.
“If allowed to proceed, the acquisition would deprive American merchants and consumers of this innovative alternative to Visa and increase entry barriers for future innovators.”
Plaid, which was founded in 2013, has developed a tech platform that aims to make it easier for developers to build financial services applications. Its tech links financial data from individual’s bank accounts to the apps they use to manage money.
The complaint alleges that Visa viewed the acquisition of Plaid as an “insurance policy” to protect its business.
In a statement, Visa said it “strongly disagrees” with the Department of Justice’s “legally flawed” arguments.
“This action reflects a lack of understanding of Plaid’s business and the highly competitive payments landscape in which Visa operates,” the statement continued. “The combination of Visa and Plaid will deliver substantial benefits for consumers seeking access to a broader range of financial-related services, and Visa intends to defend the transaction vigorously.”
Visa announced in January of this year that it had signed a definitive agreement to acquire San Francisco-based Plaid. The $5.3bn deal would be the second-largest acquisition in Visa’s history.
At the time of the announcement, Visa said that connectivity between financial institutions and developers has become “increasingly important” to facilitate consumers’ ability to use fintech applications.
“Plaid is a leader in the fast-growing fintech world with best-in-class capabilities and talent,” Visa CEO Al Kelly said at the start of the year.
“The acquisition, combined with our many fintech efforts already underway, will position Visa to deliver even more value for developers, financial institutions and consumers.”