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Visa Buys Plaid (wsj.com)
538 points by coloneltcb 11 days ago | hide | past | web | favorite | 319 comments

Plaid scrapes bank credentials to enable challengers vs banks. VISA seems to be officially taking a stand with fintechs and challengers. So a bank can no longer piss off VISA & refuse scraping.

But here's my bigger bet. Using this, VISA will launch a competitor to FICO.

It'll serve as a means for VISA to even more strategically target customers for its financial products/services.

Plaid and the broader explosion of white-label fintech infrastructure is great. Ultimately, it increases the number of companies that can enter the space and provide more competitive loan management tools, decision engines, identity verification, credit, wealth management, and so on to consumers. License the most complex/costly infrastructure, and then progressively swap out those vendor provided capabilities with internal platforms as they scale up (e.g. Revolut).

There's still lots of problems to solve in the connectivity space that Plaid sits in, and the pursuit of some kind of unified open personal finance data standard isn't really on the table for those steering the big initiatives (e.g. FDX). This is mostly due to the variety of the data and number of players (tens of thousands of institutions). For more on that, this interview with Jeff Leathers, founder of Quovo, a similar company that was acquired by Plaid in 2019 is not a bad listen:


Plaid is the scraping app US fintech startups had to use before https://teller.io (which uses the bank's own native APIs and therefore goes down way less) launched there. Good timing for the Plaid exit. Teller will eat their lunch.

Abstracting away from this specific case, it is IMO just another example of potential very significant and real risks of being reliant upon cloud or, more generally, technological platforms operated by potentially acquirable companies. While some acquired companies remain relatively independent and continue offering original products (in short-to-medium term), many don't [I have compiled a long list of case studies ...]. And if this (along with IT security) doesn't make most CTOs and/or CIOs to wake up in the middle of the night, then I don't know what does. Industry consolidation is IMO a pretty scary, but probably inevitable, trend. I think that the safest approach (sans some corner cases, e.g., a unique technology) is to build one company's technology platform on an "unacquirable" technology infrastructure (for the cloud, that would be AWS, Azure and, to somewhat lesser extent, GCP). Thoughts?

Curious what happens to options that are yet to vest when a company gets acquired like this? I had a potential offer from them and I'll be losing some sleep tonight :(

It probably depends on the terms of the acquisition, but here's one data point: when the company I work for was acquired, all options were vested immediately and purchased by the acquiring company. So, options => cash.

There's some flexibility, but often the unvested options in the acquired company are converted into unvested options in the acquiring company on the same schedule.

> often the unvested options in the acquired company are converted into unvested options in the acquiring company on the same schedule

Yup, and I'd clarify that the new options aren't 1:1, but calculated based on some price-per-share of the acquired company.

They are talking about potential offer. There is no agreement between the two sides.

From the documents at: https://investor.visa.com/events-calendar/Event-Details/2020...

Deal is

* $4.9B cash consideration

* $400m retention equity as VISA RSUs

Congrats to Plaid!

Overall, I'm no fan to these scrapers. Apart from the army of engineers (internal cost) required to maintain them, on the outside they sell a promise that is putting user's privacy at risk. This is especially prevalent in the bookkeeping space.

Many "me too apps" stitch their services using Plaid to provide bookkeepers with bank feeds & statements for their clients.

Other's use Xero's HubDoc (which Xero paid 70m for few years back) which basically does the same thing; scraping financial statements from many online services using a combination of tools and humans. It's a goldmine for hackers; plain text logins are stored in their database to practically many online accounts owned by business owners.

Amazing to what degree people will go to to save few hours of labor each month.

That's interesting... 200M accounts on Plaid.

You gotta figure that's near the top of the S-Curve, right? Very close to 100% of the TAM in the US, and I would imagine that global expansion is costly given banking regulations in different regions. Visa already has the reputation / relationships to push forward there.

Congrats to the team!

Do the early employees get a huge payout on their options?

Perhaps they'll just get visa gift cards... ;)

Even if they had really shitty agreements I bet they'll see something substantial. Reports are saying it was a 5.3 billion purchase price. That's a lot of money for 400 employees.

Having 400 employees doesn't say much about how equity is distributed, though. E.g., (made up numbers, I know nothing about Plaid's comp specifically) if an employee gets 1 basis point over 4 years, that's 0.01% * $5.3 billion / 4 = $132,500, which combined with a startup salary might land you at around Google L4.

Unless plaid's equity structure was very unusual, early employees (at least in engineering) certainly received much much more than 1 basis point.

Sure, but what's early? I don't think it's unheard of to get to O(1 basis point) at 100s of employees.

I've seen an offer at a ~50 person company for 1-2 basis points.

The early employees will get millions of dollars. This is 1)an unreasonably large amount of money for anybody to make or 2)nothing compared to the billions that the founders and venture investors will make.

Really don't like Plaid because they normalize phising. Surprised they aren't being condoned for this.

I think you mean "condemned"? To condone is to (often implicitly) approve of something that is ethically or morally dubious.

Yes, I think condemned is probably a better word!

Guess they survived the 3.5 year security risk [0]...

>7 points by Rainymood on June 21, 2016 [-]

>I'm going to be really rude here (forgive me) but I feel like every time a security question comes up you dodge the question really hard.

>I want to know one thing: If I log into your service with my bank credentials. Do you store these as plaintext files (or "encrypted" files of which you have the encryption key)? Yes/No.

>Furthermore, congratulations! I've been trying to start something up like this in Europe but I feel like there are way more restrictions in Europe on banking data and this kind of third-party aggregation. Sorry for being so rude.

Here is some previous news on Plaid on HN.

* 2016-06-20 Fintech Firm Plaid Raises $44M (wsj.com)[1]

* 2018-12-11 Fintech startup Plaid raises $250M at a $2.65B valuation (techcrunch.com)[2]

* 2020-01-14 Visa Buys Plaid (wsj.com)

[0] https://news.ycombinator.com/item?id=11939103

[1] https://news.ycombinator.com/item?id=18654880

[2] https://news.ycombinator.com/item?id=18654880

Visa invested in their Series C[0], so it seems unusual that they'd also acquire the company (why not acquire it back then?). Any ideas why this might have happened? Past examples?

[0] https://www.crunchbase.com/organization/plaid#section-fundin...

> so it seems unusual that they'd also acquire the company (why not acquire it back then?)

Not unusual at all. Pretty typical for CVC in fact. Couple of factors:

1. CVC (Corporate Venture Capital) typically tries to invest in similar markets of companies that either are competitive or pseduo-competitive (think of it as a hedge). For example, this would be like PayPal investing in Venmo.

2. It's cheaper in the long run for a CVC to make 10 of these bets to find that one that doesn't kill their core business model (usually a cash cow). That's why you see Ford/GM putting money into self-driving car start-ups.

3. They were probably not at the level of scale ready for Visa to take them on at the time of the Series C. This was basically a down-payment for their eventual acquisition. It basically "you're too risky for us to buy, so here's some money that we can write off if you end up failing, but if you do fail, we don't have to deal with all of the crap that goes with a failing bus unit (layoffs, compliance, etc).

Great points (as well as the other comments).

I'm curious to learn more about strategy here since Paul Graham says there probably aren't more Googles because companies are acquired too soon. Facebook is famous for the Yahoo! offer. Stripe would have been a great acquisition (if they would have accepted any).



I’d speculate this is likely a result of one or both of the following:

1. A de-risking strategy. Investing early effectively discounts a future acquisition, but doesn’t go so far as to bet the farm on the businesses success. They would also gain very early and regular access to financials that would tell them if it’s worth the follow-up plunge or if it is on its way to bust. 2. The founders thought there was more room to grow independently, but wanted to keep Visa friendly and close to home. Best way to do that is to change an acquisition conversation into a partnership/investment conversation.

They wanted to see what Plaid could accomplish with a little more money (and time) before spending a lot of money on the company. They liked what they saw and wanted full control.

Or they realized Plaid was becoming too valuable to its competitors. Or they didn't have the cash available at the time. Or Plaid didn't want to sell at the time.

Google Ventures participated in funding a number of companies that Google later acquired.

Make sure it worked. Also, Plaid didn't have any data to buy when it first started. Now, they have tons of data.

Had Plaid only been mildly successful, Visa likely would have just continued to let it run and get back its investment. But, now they have a decent amount of transaction data among other things, possibly making it more advantageous to own it outright than hope you can be one of many partners getting access to that data.

It seems like their investment might have been a way to dip their toes into the water. It probably allowed VISA the ability to do their due diligence and assess whether the Plaid team would execute on the stated vision.

Open Banking Standards in Commonwealth Countries will make the need for these scrapers redundant and limit the tools use to the US only.

Never been a fan of scrapers. Very unreliable and a big security hole especially when MFA is used.

I wonder if the tightening data privacy regulations (CCPA et al) forced them to sell or whether it was just a good sale opportunity.

There is a service like this in Australia, POLi. It's used almost exclusively to facilitate EFT transactions to vendors that can't use the regular channels like PayPal, local Banks, or Mastercard/Visa. ie. Porno, gambling, bitcoins, drugs.

I learned about it by working in gambling. I cannot believe that people are OK with just giving their online banking details to a company. It's insane! but people are willing to use it because there is almost no other way of getting the product they want.

Take the legislative risk out of handling those types of transactions, and shit like this will disappear.

"but that ignores the path dependency of one market using cash until recently, and the other receiving unsolicited Bank Americards 51 years ago. Once a job is done — and credit cards do their jobs very well — it takes a 10x improvement to get users to switch, and, in a three-sided network, that 10x is 10^3."

Who uses Plaid for ACH verification must start to think on alternatives. Visa blocked PayPal to growth its ACH payments a few years ago.

ACH services using any kind of API is and has been a pain today.... Im using intuit and they have no good API, it forces you to do a redirect similar to paypal. You basically have to write your own screen scrape tool to integrate with these people.

Didn't know such a thing existed till now. They took the feature that mint and others built early on and turned it into a business. Awesome. Have no idea how good it is but a multibillion dollar exit is great.

Pretty sure Mint was built on Yodlee, a Plaid competitor

I’m wondering if this will make Plaid’s pricing more or less opaque. Right now it’s go build it and then negotiate a rate. I think they would get a lot more uptake if they had upfront pricing.

Nearly every large SaaS company has opaque pricing because price discrimination allows them to make far more money than they would if they had published prices.

The WSJ updated the article this links to with the transaction price, $5.3 billion, "Visa to Pay $5.3 Billion for Fintech Startup." Maybe the HN title for this item should be updated?

Plaid is trash. Doesn’t work with 2FA and is super unreliable. It’s crazy that a project with so many faults could be financially successful.

Banking regulators should mandate open banking APIs and default-private, non-sellable transaction data. The fact that they don't means that they don't work for us, government has been turned into a tool to enable and encourage rent-seeking. The "deregulation" obsession in this country is turning us all into modern feudal serfs, we have no option but to toil in our Lords' properties without recourse.

It would interesting to know if the employees saw any for that money.

This is too bad if they sell this prematurely

5.3 billion is not premature. That's a fucking jackpot for a company that only raised 350MM.

I wish them well - could they have grown to be much more?


Edit: I guess I’ll look up their homepage, and try to scroll through the marketing speak to figure it out. Seems like it would be nice if someone in the know could just tell us.

Still waiting for the Zelle API.

Please I wanna know how to work

Congratulations to the Plaid team!

I wanna know how to work

So visa has been plaid?

For $5.3 Billion!!!

Heard they were offering .1 percent for senior software engineers 6 months ago. Congrats guys!


FFS...can anyone run a business these days without XYZ company getting acquired.

At least we'll be able to say... They've gone into plaid!

When I was a kid, I always laughed at the "F*, even in the future nothing works" quote. Now that I am a software engineer, I just get sad.

i always hope that new exciting companies will work towards a sustainable business model that can exist without a buyout from some mega. i understand that its difficult to start a business, much less a sustainable one, but its sad to see such promising companies grow into a pitch instead of a business.

maybe its a good thing i didn't get hired for their SLC office, because i would have quit over this.

Out of curiousity, why would this acquisition be a reason to quit?

to me this move indicates weakness. its a fine exit for the early employees and the executive team, but there's no reason to sell if you have a solid business plan and a realistic vision for future profitability. maybe the only vision for the future they want to pursue involves some expensive investment or the business was built on massive debt that can only be paid of in this way.

i want to be a part of building something that can survive as an independent entity. selling is an admission that this is either not a goal or not possible given the current position of the company. both of these are against my ethics. why should i stay at a company that has openly admitted that they are incapable or unwilling to pursue independence?

At this point, what difference does it make? Visa can survive as an independent, profitable entity by your criteria.

> but there's no reason to sell if you have a solid business plan and a realistic vision for future profitability.

They had 5.3 billion reasons to sell. With an acquisition offer that high, it's not about the company's ability to survive independently. It's about doing what's in the best financial interests of the company and employees.

> i want to be a part of building something that can survive as an independent entity. selling is an admission that this is either not a goal or not possible given the current position of the company. both of these are against my ethics. why should i stay at a company that has openly admitted that they are incapable or unwilling to pursue independence?

Your distinction is a bit arbitrary. Plaid wasn't a fully independent company after they took significant money. Take a look at their board of directors. Only 2 out of 5 board members were Plaid executives. They had already "sold" part of the company when you applied.

i didn't say "fully independent" i talked about a willingness to pursue independence. that's the difference that i care about. i value independence more than money. you do need a certain amount of money to be autonomous, but its about end goals. i don't agree with the end goal of "make the best business deals for the biggest amount of money". besides, long-term you make way more money if you are independent. i have respect for visa and i'd work there because they do value independence, but i wouldn't work for a subsidiary who couldn't hack it as a competitor.

Anyone know if this acquisition is a win for Plaid, or are they are just panicking before bank API middleware becomes commoditized (e.g. http://paysli.com/ offering free authentication)

I see a lot of hate for Plaid here. I was my understanding that the only reason you would really ever use Plaid is because they were able give programmatic access to flat-rate fee ACH payments of basically any size. Obviously they were never something you could compare to Stripe. I wonder what's gonna happen with in the near future, especially considering Plaid was obviously stepping on the toes of the interchange-rates of the likes of Visa.

Plaid provides an api to access transaction history and verify bank account ownership.

They don't do ACH transfers.


"""To get started with ACH payments, you need a system that can connect you (the originator of the ACH transaction) with an Originating Depository Financial Institution (ODFI). Additionally, that system should be able to give updates on the status of the payment and give the developer an interface to authenticate, verify, and charge the user on demand.

That’s where Stripe comes in. In January, the payments infrastructure giant debuted support for ACH payments through its platform alongside a partnership with us here at Plaid. Now, Stripe users can authenticate their customers through Plaid (or, if they must, micro-deposits) and then charge them through ACH."""

Am I misunderstanding something?


Okay so maybe they weren't doing the transfers, but they were certainly facilitating them and adding to the adoption of more ACH based payments (which means less credit-card payments). Same conflict of interest applies. What does Visa care about bank account verifications?

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