Almost two months after the Department of Justice (DOJ) raised antitrust concerns, Visa has scrapped USD 5.3 billion acquisition deal with Plaid. The antitrust lawsuit was filed by the DOJ on the grounds that the deal would reduce competition in the payments industry. But the company had denied it saying it in no way was trying to eliminate the competition. However, Visa has announced that the deal is being scrapped on mutual understanding. The move is being considered as a setback to Visa as it has been trying to add the fintech services to its payments business. Plaid is known for providing software solutions to companies like Venmo and Mint. The services help payments groups and financial planning companies to connect with their bank accounts.
The deal between the two companies was in January last year. Al Kelly, chief executive officer of Visa, had then said that the deal would have brought the combined company at the epicenter of the fintech firms. However, the DOJ moved the antitrust lawsuit in November 2020 alleging that Visa decided to acquire Plaid as it was developing its own platform. This would have challenged the dominance of Visa in the sector. The lawsuit had cited an internal Visa document wherein an executive of the company allegedly referred to Plaid as a ‘volcano.’ The executive had said that the ‘current capabilities of Plaid are just the tip which is visible above the water.’
According to the lawsuit, senior management of Visa had warned directors of the company about the potential downside risk of around USD 400 million if any rival company manage to buy Plaid. These claims were outrightly rejected by Visa and Plaid echoed it. However, the DOJ has now claimed that the termination of the deal between the two companies is a victory for consumers as well as small businesses. Plaid has now said that it will work with Visa as a partner and an investor going forward.