Daniel Acker/Bloomberg
Visa and Plaid have called off their merger because of federal antitrust opposition to the deal.
The companies struck an agreement to merge a year ago, with Visa (ticker: V) agreeing to pay $5.3 billion for the payments-technology company. Plaid verifies and links accounts on apps like
PayPal Holdings ’ (PYPL) Venmo service with a user’s bank account. Visa and
Mastercard (MA) had both invested in Plaid, which began in 2012.
But in November, the Justice Department sued to block the merger, arguing that Visa was a monopolist in online debit controlling 70% of transactions and that Plaid aimed to challenge Visa’s dominance.
Wall Street is disappointed that
Visa won’t be merging with fintech upstart Plaid, after both companies canceled the deal due to antitrust opposition.
But analysts still see plenty of reasons to own Visa (ticker: V) and its chief rival
Mastercard (MA), maintaining that the underlying dynamics for the stocks a global economic recovery, rebound in cross-border travel, and adoption of digital payments may only be accelerating.
Visa’s acquisition of Plaid would have helped the card network maintain its dominance in online debit transactions, adding about a percentage point a year to revenue. It could also have opened up new revenue streams for Visa in open-banking and financial-data networks.
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Even banks that aren’t part of the merger bonanza can expect to see positive effects from a wave of consolidation. Dreamstime
After a relatively dormant 2020, Wall Street expects a surge of bank mergers this year.
The economic impact of the coronavirus pandemic dampened much of the expected merger activity for 2020 even as it served to intensify the rationale for why banks should combine. Last year, amid the worry over low interest rates and potentially ballooning loan losses, banks were busy navigating through their own issues and less interested in acquiring banks that could potentially bring their own set of problems. But with many of the worst-case scenarios for the economy thankfully avoided, banks are coming out of the crisis feeling a renewed pressure to become more efficient.
Visa abandoned its $5.3 billion planned acquisition of Plaid, an important competitor in the financial-technology space, in the face of a Justice Department antitrust lawsuit.