What’s Visa Going to Do with FinTech Startups Plaid and VGS?

| Updated
by Tolu Ajiboye · 3 min read
What’s Visa Going to Do with FinTech Startups Plaid and VGS?
Photo: Shutterstock

In a short time, Visa has announced major investments in fintech startups Plaid and VGS. Let’s find out what plans for working with them Visa might have.

Less than a week ago, Coinspeaker reported that payment giant Visa now owns fintech startup Plaid. Visa acquired the San Francisco-based company in an interesting deal worth $5.3 billion. As we reported, the figure is more than double of Plaid’s 2018 valuation and is expected to stoke the fintech flame already burning in the company.

So far, reactions to the acquisition have been great as people believe that their collaboration will do wonders for the fintech industry.

The financial world is rife with acquisitions as some of the biggest names seek to expand their services. Apart from expansion, there is also a desire to ensure as much monopoly as possible. With Visa in constant competition with Mastercard, the recent acquisition could be a feather in Visa’s hat. But what exactly will happen next?

What Will Visa Do with Plaid?

As with most acquisitions, there’s a very good chance that nothing happens immediately. Because they have to make plans and ensure that there is synergy between both “factions”, executing anything takes a minute.

Another reason why there might be a need to wait a bit is to properly incorporate Plaid’s employees. Too much change in the early days of a new acquisition could scare employees away. If competitors see that employees are dissatisfied, said employees become easy prey, to the detriment of Visa. This period of “silence” could last up to a year.

After this, Visa would need to make sure that all of its pre-Plaid endeavors including projects and clients are not in any way affected. This means that Visa cannot deny any relationships with other outfits, because of its new partner. Trying to keep all of its branches alive might involve a lot of compromise on Visa’s part. This compromise could mean reduced profits, but with all-round success in the end.

Lastly, the Plaid acquisition might help the public see that Visa has real intentions in the fintech market. While Plaid might not exactly be the final ingredient in Visa’s mix, it would sure go a long way. Through Plaid, Visa will now be able to offer a lot more services to thousands of customers.

Possible Plaid Issues for Visa

Finance expert Tom Noyes in a recent blog post has highlighted a few problems Visa could face with Plaid. Firstly, Banks would seriously be on the lookout. Because of their worry about consumer data, these banks would quickly cut ties with Plaid anytime they feel some threat to that sanctity.

Secondly, Noyes says that banks “want to own the consumer interaction” and might not be eager to embrace anything that could disrupt their monopoly.

Furthermore, Noyes also suggests that Visa’s services allow them to be a middleman. This means that they can maintain a certain “neutrality” which could be very advantageous. Partnering with Plaid somewhat erodes that detachment.

Visa and VGS

Shortly after the Plaid deal, Visa announced a new strategic investment in another fintech company, Very Good Security (VGS). The successive fintech moves agree with thoughts on Visa’s decision to dive deeper into fintech. However, unlike the Plaid detail, details on the VGS deal are undisclosed. The same is about the precise plans of Visa regarding this investment.

VGS is known for helping its customers hide sensitive data. The Visa investment is expected to help VGS function better with its infrastructure-as-a-service offering.

Business News, Deals News, FinTech News, News
Tolu Ajiboye
Author Tolu Ajiboye

Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.

Related Articles