Apparently the DOJ considers Plaid a key infrastructure component for next generation financial apps, and in a bit of a stretch, a WSJ article suggests that Plaid might eventually displace consumer’s use of cards, even though that is only a small part of Plaid’s business today.
Plaid can be used to validate a consumer’s checking account details for use in a retailer’s private label debit card and/or mobile app. Plaid is also used to aggregate data from disparate accounts for budgeting, savings, and investing apps. The DOJ’s investigation is likely the result of the merchant communities’ concerns that Visa might discontinue the non-card payment capabilities of Plaid in the future.
But let’s not forget that Plaid is not the only game in town. There are other similar solutions offered by legacy processors and fintechs. And certainly non-card based purchases through the developing faster and real-time payments market is a hot topic:
“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.
The Justice Department is also reviewing Mastercard’s nearly $1 billion deal for fintech firm Finicity, a startup similar to Plaid, as well as Intuit Inc.’s roughly $7 billion deal for personal-finance portal Credit Karma Inc.
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.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
