Plaid CEO touts new ‘clarity’ after failed Visa acquisition

Yesterday, we spoke with Plaid CEO and co-founder Zach Perret after news broke that Visa no longer plans to buy his company for $ 5.3 billion.

The deal was heralded in early 2020 as a sign of the growing importance of fintech startups. Then it failed to close, eventually running into a lawsuit from the U.S. Department of Justice. A few months later, the acquisition was dropped.

Sentiment in the market changed since the transaction was announced. As TechCrunch reported yesterday, there’s a good deal of optimism to be found amongst investors and others that Plaid will eventually be worth more than the price at which the Visa deal valued it.

What follows is a summary of our conversation with Perret, digging into a number of topics we felt most were pressing in the wake of Plaid’s unshackling.

Now what?

First and upfront: it does not appear that Plaid is racing to the public markets via a blank-check company, or SPAC, a question several readers asked on Twitter. Our impression from our chat regarding near-term liquidity via the public markets is that those with their hopes up have them up a few years too early.

TechCrunch asked Perret how it feels to be free from his erstwhile corporate boss.

He said that the last few years have been a “rollercoaster,” adding that when they made the choice to sell, it made sense at the time from mission, and delivery perspectives — Visa wanted to accomplish similar things and could give his company access to a wide network of potential customers.

Startups – TechCrunch

Visa will not acquire Plaid after running into regulatory wall

Visa and Plaid called off their agreement this afternoon, ending the consumer credit giant’s takeover of the data-focused fintech API startup.

The deal, valued at $ 5.3 billion at the time of its announcement, first broke cover on January 13, 2020, or nearly one year ago to the day. However, the Department of Justice filed suit to block the deal in November of 2020, arguing that the combination would “eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers.”

At the time Visa argued that the government’s point of view was “flawed.”

However, today the two companies confirmed the deal is officially off. In a release Visa wrote that it could have eventually executed the deal, but that “protracted and complex litigation” would take lots of time to sort out.

It all got too hard, in other words.

Plaid was a bit more upbeat in its own notes, writing that in the last year it has seen “an unprecedented uptick in demand for the services powered by Plaid.” Given the fintech boom that 2020 saw, as consumers flocked to free stock trading apps and neobanks, that Plaid saw growth last year is not surprising. After all, Plaid’s product sits between consumers and fintech companies, so if those parties were executing more transactions, the API startup likely saw more demand for its own offerings.

TechCrunch reached out to Plaid for comment on its plans as an independent company, also asking how quickly it grew during 2020. Update: Plaid responded to TechCrunch noting that it saw 60% customer growth in 2020, bringing it to more than 4,000 clients. If we presume even moderate net dollar retention amongst its customer base, Plaid could have grown by triple-digits last year, in percentage terms.

While the Visa-Plaid deal was merely a single transaction, its scuttling doesn’t bode well for other fintech startups and unicorns that might have eyed an exit to a wealthy incumbent. The Department of Justice, in other words, may have undercut the chances of M&A exits for a number of fintech-focused startups or at least created more skittishness around that possible exit path.

If so, expected exit valuations for fintech upstarts could fall. And that could ding both fintech-focused venture capital activity, and the price at which startups in the niche can raise funds. If the Visa-Plaid deal was a huge boon to fintech companies that used it as a signpost to help raise money at new, higher valuations, the inverse may also prove true.

Startups – TechCrunch

Latvian fintech Nordigen launches free open banking API platform across Europe to challenge Tink & Plaid

Riga-based fintech startup Nordigen has announced the launch of the first-ever free open banking API platform. This platform will let developers in companies of all sizes to access PSD2 open banking data from all major banks across Europe via the API. This new platform from Nordigen is claimed to provide connectivity to over 29 countries across the EEA (European Economic Area), including the UK.

Nordigen’s free open banking platform

“For the majority of fintechs, accessing open banking data is prohibitively expensive. Incumbent open banking companies require payment for every single connected end-user, meaning the cost of access rapidly rises for fintechs as they scale. Moreover, the market is difficult to navigate – there are more than 380 AISPs in Europe, many of which offer connectivity as a service. Each of them has a different pricing model and API documentation,” says Nordigen in a press release.

“This makes accessing open banking data both expensive and technically challenging, while the limited geographical coverage of most existing providers forces clients to resort to a patchwork of different solutions. Usage of PSD2 is not yet mainstream beyond the UK,” it further explains.

The fintech startup claims that its new freemium, pan-European model removes the financial barrier while simultaneously simplifying the process of choosing and integrating to an open banking platform.

The new data connectivity platform of Nordigen complements its expertise in data analytics. Founded in 2016 by Roberts Bernans and Rolands Mesters, this Latvian fintech startup has helped global clients extract more value from data in order to make better decisions, especially when it comes to estimating the creditworthiness of loan applicants. Also, the company plans to raise a Series A funding round sometime in 2021.

It works with banks, lenders and fintechs in 19 countries, helping them leverage open banking data for lending, personal finance, automated customer screening and customer onboarding.

Rolands Mesters, CEO and co-founder, Nordigen says, “Our new freemium model is there to help more fintechs solve real-world problems, and there has never been a more crucial time for this. The Covid pandemic is accelerating uptake and showing us a glimpse of the transformational potential open banking has to offer, but we need something more to help companies turn their bold visions into reality. Free access to open banking is that.”

How about the competition?

The open banking platform of Nordigen positions it against competitors such as Tink and Plaid. Unlike competitors that need heavy technology stacks using custom bank integrations, Nordigen offers a freemium service with a lightweight technology stack that relies exclusively on PSD2 bank connections.

Built with APIs in mind, the open banking platform of Nordigen focuses on providing the raw banking data that most developers require. It does within a steady and robust manner sans the necessity for screen-scraping or reverse engineering, claims the company.

Rolands Mesters, CEO and co-founder, Nordigen, says, “In Europe, the business model of charging for open banking data, as Tink and Plaid do, will soon be history. Nordigen is the first to launch a free open banking data service, but we certainly won’t be the last. We believe the future of open banking is in the freemium model and that the rest of the industry will soon follow.”

Main image picture credits: Noridgen

Startups – Silicon Canals

Join us for a live Q&A with Plaid CEO Zach Perret today at 10 a.m. PDT/1 p.m. EDT

Later today, TechCrunch’s Extra Crunch Live series is sitting down with Plaid CEO Zach Perret. Extra Crunch members can tune in at 10 am PT/1 pm ET/5 pm GMT. The livestream links and scheduling links are below for your use.

Extra Crunch Live has previously spoken with investors like Sequoia’s Roelof Botha, business celebrity Mark Cuban, and entrepreneurs like Eventbrite’s CEO and cofounder Julia Hartz. Perret, however, is unique in that he’s joining us after a multi-billion dollar deal to sell Plaid to Visa was announced, but before the deal is completed. The situation should make for an interesting conversation.

TechCrunch wants to know about Plaid’s $ 250 million, 2018-era venture round and how the huge infusion changed Plaid’s growth plans and corporate culture. We’re going to ask why Perret decided to sell the business instead of working to take it public and how the decision to sell was evaluated among leadership and investors.

Plaid’s core product helps other fintech and finservices companies connect to consumer bank accounts.

Hosts Jordan Crook and Alex Wilhelm will also dig into trends that we are keeping tabs on, like huge growth in market demand for savings and investing products. And as Plaid helps a host of other fintech shops reach consumers, it has a view into what types of fintech startups are doing well. We want to know what’s bubbling up now that is new and surprising.

If time we’ll also chat about API-based startups themselves and how some fintech companies today are bringing lower-cost services to individuals who are often underserved — and overcharged — by traditional banking players.

We’ll ask your questions as well. So, make sure your Extra Crunch membership is active, and we’ll see you later today. Chat soon!

Details

The following links will get you sorted. YouTube livestream link will be added closer to the start time.

Startups – TechCrunch