Plaid and Visa terminate £3.9bn acquisitionby
The US Justice Department filed suit to block Visa’s acquisition of Plaid, causing the two to terminate the merger agreement. Shaheen Budhrani looks at what this means for accountants.
Last week, banking infrastructure startup Plaid terminated the Visa acquisition, citing “the pace of a multi-year regulatory review is not compatible with the fast-moving realities of a startup”. This “regulatory review” refers to the November 2020 US Department of Justice’s lawsuit on the basis of anti-competitiveness.
Much has been written in the immediate aftermath on what this means for Plaid and Visa, but what does this mean for consumers, small businesses and accountants?
In 2018, the European regulators put control in the hands of consumers by encouraging more financial data transparency in the banking sector. This initiative, labelled PSD2 but more widely known as Open Banking, has led to an acceleration of the growth of the fintech ecosystem.
Startups wanting to leverage customers’ financial data to provide this transparency have relied on a number of infrastructure players to emerge in the industry. Essentially providing the ‘rails’ for fintech startups to run on, companies like TrueLayer, Railsbank and Tink to name a few, and of course Plaid have capitalised on this.
Financial management and the fintech ecosystem
The ecosystem provides a huge opportunity and addressable market for fintech startups and their infrastructure providers, which is why Plaid choosing to continue operating independently is great for consumers and small businesses.
As things stand, some of the most prominent use cases are, for example, consumers being able to aggregate all their accounts in one place, either in their banking app or on a personal finance management app. Other apps enable you to better manage your budget by analysing your transaction history or to top up your investment account using direct account-to-account payments. These are a great start, but we are just scratching the surface of what is possible.
Much like Stripe’s aim is to “increase the GDP of the internet”, there is no ceiling as to how consumers and small businesses can leverage open finance. For accountants, this provides a huge opportunity to implement better systems for themselves and their clients. Everything from enabling smoother payroll, faster invoicing and more accurate identity management. The flow of data between a small business and accountant, via infrastructure providers like Plaid, makes things easier, faster and more secure.
Some accountants are already aware of this, of course, connecting bank feeds to accounting software and collecting fees via online invoicing. However, the real opportunities will start to emerge as open finance becomes embedded across more apps, more industries and more providers. The ability to streamline the flow of capital between businesses, their employees and their customers will become a ubiquitous offering for the majority of firms across the country.
Below are Plaid’s current offerings for business finance – and they’re just getting started:
What does the future look like for Plaid?
Alluding to this opportunity Plaid UK Country Manager Keith Grosefor has openly said, “I think open banking payments and building new functionality will be the story of what we’re focused on in Europe in 2021”. This is why across the tech industry, commentators are bullish on the future of Plaid as an independent company, fintech services and Open Banking in general.
Just like the physical world, when we invest in infrastructure projects, we talk about the immediate impact in terms of jobs created and value invested. However, the true value in terms of increased interconnectedness and growth opportunities are so hard to size up. There is no doubt that the size of the European fintech ecosystem is going to be a number of multiple times larger in size a decade from now, and that use cases for open finance will be wildly different to what we envisaged was possible today.
A quick glance at Plaid’s careers page shows they are aggressively looking to increase market share in Europe too, with a number of commercial roles recently going live. Continuing life as an independent company with the tailwinds of Open Banking, demand for greater financial transparency and ever-growing use cases means I won’t be betting against Plaid significantly outgrowing their last valuation at USD$5.3bn.
For small businesses and accountants, there has never been a better time to keep a close eye on the developments of fintech in Europe.
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Shaheen is a Senior Bank Partnerships Manager at Flux, a London based startup that delivers digital receipts into your banking app. Shaheen previously worked at Xero alongside co-hosting a fintech podcast for accountants. Before that, Shaheen ran a small business in Hong Kong, where he is originally from.