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Visa to Acquire Plaid, Fortify Place in Fintech Industry

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Visa Inc. (V - Free Report) has announced that it will acquire Plaid, a financial technology company based in San Francisco for $5.3 billion.

Plaid, founded in 2013, provides network connectivity between financial institutions and developers, enabling applications to connect with users’ bank accounts. This fintech startup focuses on enabling consumers and businesses interact with their bank accounts, check balances, and make payments through financial technology applications.

Plaid’s products allow consumers to easily share their financial information with thousands of apps and services such as Acorns, Betterment, Chime, Transferwise and Venmo. These apps are popular among consumers for their financial planning, which includes spending, saving and monitoring investments.

For Visa, Plaid seems to be the best fit, given its leadership in providing network connectivity. Notably, 25% of the people with a U.S. bank account have used Plaid to connect to more than 2,600 fintech developers across more than 11,000 financial institutions.

Demand for Plaid services is likely to increase, thanks to the rapidly growing preference for fintech application to transfer money. Notably, 75% of people transferred money via an app in 2019 compared with 18% in 2015.

The acquisition will aid Visa’s performance in digital financial services space, expanding its total addressable market and accelerating long-term revenue growth trajectory. It will also provide more leverage to its other fintech efforts already underway. The deal will position Visa to deliver even more value for developers, financial institutions and consumers. It will allow the company to work more closely with fintechs through all stages of their development and drive growth in its core business.

Visa will pay for the transaction in cash and debt. The deal will have no impact on the company’s previously announced stock buyback program or dividend policy. The acquisition is expected to close in the next three to six months.

Visa remains the forerunner in the payments industry when it comes to innovation and technology, business growth, mergers and acquisitions. These have driven business for the company with payment volumes of $8.45 trillion (as of September 2019) compared with $4.34 trillion for Mastercard Inc. (MA - Free Report) , $1.17 trillion for American Express Co. (AXP - Free Report) and $172 billion for Discover Financial Services’ (DFS - Free Report) Diners Club, in the same space.

The stock, with a Zacks Rank #3 (Hold), has gained 42.5% compared with the industry’s growth of 44.5% in the past year.


You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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