Fintech/Analysis/

European fintechs spy opportunity in Visa’s failed Plaid deal

The failure of Visa's $5.3bn bid to absorb data-sharing fintech firm Plaid last week is great news for European fintechs.

By Ryan Weeks

Daniel Kjellén and Fredrik Hedberg founded the Fintech company Tink in 2012.

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When Visa scrapped its $5.3bn bid to absorb data-sharing fintech firm Plaid last week, one European fintech, in particular, was overjoyed.

A source close to Tink, the Swedish open banking platform which raised $103m in December of last year, said the company and its investors were “punching the air” when they heard the deal had fallen apart.

This might seem counterintuitive.

They could have instead been worrying that the likelihood of someone like Visa or Mastercard someday snapping up their company had just decreased dramatically, lowering the chances of a lucrative exit.

The US Department of Justice (DoJ), after all, had based its opposition to the deal on the fact that Plaid was “developing a payments platform that would challenge Visa’s monopoly” and that the deal “would have enabled Visa to eliminate this competitive threat to its online debit business before Plaid had a chance to succeed”.

But, for Plaid’s European rivals like Tink, there are several good reasons for cheer. Why?

First, the Visa deal would have created a formidable competitor which any independent startup would be hard-pressed to contend with. Instead, Europeans are now competing with just another startup — albeit a rapidly-growing one (Keith Grose, head of Plaid in the UK, told Sifted last week that the startup will double its headcount across London and Amsterdam offices from 50 to 100 this year).

Perhaps more importantly, as the person close to Tink pointed out, the collapse of the Plaid deal means Visa is still in the game as a potential acquirer and now more likely to lean toward buying one of Europe’s biggest open banking platforms.

“I do think Europe will see the largest open banking acquisition now the deal is off,” said Jamie Campbell, cofounder of rental startup Fronted and former commercial director at Bud, the open banking firm. “If anything, it has sparked deeper interest here from large financial and non-financial firms.”

Visa’s main rival Mastercard already held deal talks with Tink last year, as reported by Sifted. A Tink spokesperson declined to comment.

Why is a European deal now more likely?

The fundamental difference between the UK and the rest of Europe is the former’s PSD2 and Open Banking regulatory frameworks, which require banks to share transaction data with authorised third parties and facilitate account-to-account payments.

This has created a diverse and flourishing market of startups in London and beyond.

When it waved through the Plaid deal in August of last year, the Competition and Markets Authority, the UK’s competition watchdog, noted that while Plaid would have posed a competitive threat to Visa in the future, “it is only one of a number of payment initiation services already active in the UK, with several of these, such as TrueLayer, Tink, Token.io and Yapily, already possessing similar, or stronger, competitive capabilities than Plaid”.

The same cannot be said of Plaid in the US.

Coupling that with a notoriously nervous DoJ, it’s no wonder Europe’s open bankers are in a celebratory mood.

An earlier version of this article said that Mastercard made a bid for Tink. We have amended this to say that they instead held deal talks. 

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