The U.S. Department of Justice sued Visa on Thursday (Nov. 5) to block its planned $5.3 billion acquisition of Plaid, arguing that the deal would allow Visa to extend what the DOJ alleges is the company’s control of the online debt market.
“Visa seeks to buy Plaid — as its CEO said — as an ‘insurance policy’ to neutralize a ‘threat to our important US debit business,’” the Justice Department said in its lawsuit, filed in San Francisco federal court.
Visa announced plans in January to purchase Plaid, which enables consumers to share their banking information with thousands of apps and services like Chime and Venmo. For instance, when a user sets up a Venmo account, Plaid lets the person link their bank account to their Venmo account. The company has already integrated with about 15,000 banks in Canada and the United States.
In theory, the system could eventually allow consumers to bypass credit cards and transfer money directly from their bank accounts to a merchant’s account. By buying Plaid, Visa would reportedly gain access to 200 million consumer bank accounts and 2,600 financial technology apps that would help the company further push into areas like real-time payments and digital wallets.
However, Visa rejects the Justice Department’s claim that that would create an illegal monopoly.
“Visa strongly disagrees with the Department of Justice, whose attempt to block Visa’s acquisition of Plaid is legally flawed and contradicted by the facts,” the company said in a statement following the lawsuit’s filing. “This action reflects a lack of understanding of Plaid’s business and the highly competitive payments landscape in which Visa operates.”
Visa said its Plaid acquisition will help consumers searching for enhanced offerings of personal finance solutions, adding that it will “vigorously” fight the lawsuit. The company said that it’s “confident” the deal will benefit consumers and enhance competition.
“As we explained to the DOJ, Plaid is not a payments company. Visa’s business faces intense competition from a variety of players — but Plaid is not one of them,” the company said. “Plaid is a data network that enables individuals to connect their financial accounts to the apps and services they use to manage their financial lives, and its capabilities complement Visa’s.”
Britain’s Competition and Markets Authority already approved the Visa/Plaid deal in August.
Selected by Fintech Tube