Visa will no longer carry out a $5.3nln merger with fintech firm Plaid after the US Department of Justice filed an antitrust lawsuit to stop the move.
The US Justice Department announced that Visa had decided to drop its plans for the merger on January 12, following the initial civil antitrust lawsuit which was filed in November 2020. The Department of Justice’s main motive behind the lawsuit was to prevent a monopolistic takeover by Visa through the merger with Plaid.
In January 2020 Visa signed an agreement to acquire Plaid in a deal that was valued at $5.3 bln. Plaid’s services allow users to connect their banking applications to other financial apps – effectively sharing financial information with over 10,000 different apps supported by the service.
At the time, Visa indicated that the acquisition would open new market opportunities for the business in the US and abroad and the combination of the two companies would provide enhanced payment capabilities and ‘related value-added services to fintech developers.
DoJ driven to prevent Visa monopoly
In the 12 January announcement, the Department of Justice alleged that Visa is a ‘monopolist in online debit’ and charges users billions of dollars in fees each year to process online payments. They add that Plaid has developed a platform that will challenge that monopoly, which led to Visa’s move to acquire the business.
The complaint from the Justice Department in November last year claimed that the merger would have allowed Visa to eliminate the threat to its online debit monopoly ‘before Plaid had a chance to succeed’. The case was due to go to trial in June this year but following Visa and Plaid’s decision to terminate the merger agreement, the case has been dismissed.
DoJ hails victory for small businesses
The Justice Department’s Antitrust Division’s assistant Attorney General Makan Delrahim described the situation as a ‘victory’ for American consumers and small businesses.
“American consumers and business owners rely on the internet to buy and sell goods and services, and Visa – which has immense power in online debit in the United States– has extracted billions of dollars from those transactions. Now that Visa has abandoned its anticompetitive merger, Plaid and other future fintech innovators are free to develop potential alternatives to Visa’s online debit services. With more competition, consumers can expect lower prices and better services,” Delrahim said in a statement.
The Assistant Attorney General went on to say that the case which had been built would have proved that the merger would ‘extinguish a nascent competitor’ while further entrenching Visa’s dominance in the payments space.
The release from the Justice Department highlights Visa’s $23bln revenue in 2019, which is in stark contrast to Plaid’s $100mln revenue during the same year. While the two are at odds, Plaid’s financial data aggregation platform is held in high regard and could become a major cog in the payments space.