After calling off its bid to buy the data aggregator Plaid, Visa is shifting its focus back to its role as an enabler of digital payments and related services.
The San Francisco-based card brand is no doubt disappointed it had to shelve its
Plaid would have been its key to the open banking market, providing a shortcut for Visa's efforts to become a fintech developer for banks. But the open banking market is still getting its footing, Visa notes, and the card network says its own capabilities position it well for any future developments in money movement, security and other added services.
Still, it wasn't an easy decision to abandon the
"It would have been nice to have Plaid in our fold, but we are making a judgment that there is plenty of opportunity in this very fast-moving space," Kelly said Tuesday during a conference call explaining the decision to halt the Plaid deal.
Visa will definitely miss having the revenue from Plaid's data extrapolation capabilities, Kelly added, but he expressed confidence in the card brand's ability to land other partnerships and even extend its work with Plaid in the future.
"There is no question we have many opportunities to partner with Plaid because they have complementary capabilities, which was a lot of the basis for this deal in the first place, so we are and will be discussing these with them," the CEO said.
He described a scenario in which Plaid "could distribute or make available Visa value-added services to their clients, while Visa could offer payment facilitating capabilities for Plaid clients."
Regardless of how Visa moves forward with its fintech development strategy, the sting of the DOJ lawsuit could linger for some time.
That challenge to Visa's power in the debit market came at the same time the Justice Department had put similar scrutiny on
And it's certainly not the first time government lawmakers have asserted authority in the debit marketplace. A decade ago, the
"The DOJ’s antitrust case regarding Plaid was aggressive – I thought it was a stretch," said Eric Grover, a payments industry consultant at Intrepid Ventures in Minden, Nev. "However, Visa threw in the towel, deciding Plaid wasn’t worth a prolonged battle with the DOJ, likely mindful that with the incoming Biden administration and Democrat Congress, that the regulatory climate is going to be more difficult."
President Trump's Justice Department asserted that Visa enjoys a monopoly in the online debit market and that its acquisition of Plaid would prevent the development of a competitor that could or was likely to undermine that monopoly, Grover added.
"The theory of the case was preposterous at multiple levels," he said. "Merrick Garland's DOJ won't be less aggressive on the antitrust front," Grover said, referring to the president-elect's choice for attorney general.
When the Plaid deal was announced, in January 2020, Kelly acknowledged that some in payments and banking were likely uncomfortable with the idea of Visa's obtaining a powerful data network. But that observation did not diminish his view this week that the lawsuit was faulty.
"As for debit monopolization, we just believe the lawsuit is wrong on the basis of facts and the basis of law," Kelly said. "The reality is the debit market is highly competitive and highly complex and our debit business faces intense competition from a variety of players, including 10 other debit networks, plus other forms of payments from cash, checks and credit."
Kelly said he does not foresee the shadow of the Justice Department action hindering Visa's pursuit of other acquisitions in the future.
"Everyone has to bear in mind that this is a single lawsuit from a single regulator about a very specific M&A transaction," Kelly said. "We've made five acquisitions in the last 18 months, so I don't have any worries that we don't have the ability to do what we need to do."
Part of that strategy will include other projects with Plaid "or with lots of other players," Kelly added. Visa has the capability to do what it needs to do in establishing partnerships or acquiring other properties, he said.
Kelly noted that many local financial data networks exist across the globe, bringing a strong understanding of the nuances of their markets.
"We will be engaging with them to see how we might work together for the data extraction piece," he said.
Visa expects to be part of the growing real-time payments initiatives, but more from the standpoint of adding value to those rails — not creating or operating them.
"We are not interested in the core infrastructure of RTP systems," Kelly said. "We are focused on the other application and service layers, where I believe the value lies."
In that regard, Visa would be offering tokenization for bank accounts, customer authentication capabilities, loyalty programs, security and analytic services.
For the payments industry as a whole, the collapse of the Visa-Plaid deal could be a warning sign.
"If the DOJ antitrust standard is now that a dominant player like Visa acquiring a smaller player in a relevant, adjacent space could stymie development of new services," Grover said, "they could potentially block or deter a lot of acquisitions by leading payment networks and processors."
