Visa To Acquire Payment Tech Provider Plaid For Twice Its Valuation

Visa Inc. V is acquiring a financial technology company for $5.3 billion, the company announced on Monday.

What Happened

The acquisition of Plaid, which provides the intermediary technology between banks and payment services like Transferwise, Acorns, and PayPal Holdings Inc.'s PYPL Venmo, represents both Visa's "entry into new businesses" and "complementary enhancements to existing businesses," the company said in a statement.

"This acquisition is the natural evolution of Visa's 60-year journey from safely and securely connecting buyers and sellers to connecting consumers with digital financial services," Visa's CEO Al Kelly said.

The CEO of PayPal Dan Schulman also said that the combination of the two companies would provide their company with "exciting opportunities" to enhance their products, as Paypal has "strong relationships with both Visa and Plaid."

Why It Matters

The acquisition values Plaid exactly two times higher than the $2.65 billion it was valued at after its December 2018 funding round, where it raised $250 million.

Visa was one of the companies that participated in the funding round, along with competitor Mastercard Inc. MA, and Goldman Sachs Group Inc. GS, as reported by TechCrunch.

According to the publication, it is no coincidence that Visa has paid that amount to acquire the company.

"No one pays twice a multi-billion-dollar valuation for a firm unless they want to keep it away from their core business, or a key competitor. Or perhaps both, in the case of Plaid," TechCrunch noted.

Price Action

Visa's shares closed 0.83% higher at $195.33 on Monday.