Visa’s acquisition of fintech startup Plaid proves that well established players can be disrupted in the digital age. I want to share this note from Sam Maule, North American Managing Partner of 11:FS (a challenger bank consultancy) on his thoughts about the acquisition.
“In the spring of 2013 I met up with my good friend Billy Robbins, an SVP with Wells Fargo at the time, at a dive bar in downtown San Francisco. Billy introduced me to a few of his friends and told me to talk to one of them who had just launched and co-founded a new company. I remember thinking to myself as this young guy told me the company’s pitch “Good luck, you’re gonna need it.” This was a crowded, highly regulated space that is risk averse and has a ton of established competition.
Lots of takeaways from this experience:
- Don’t think well established players can’t be disrupted, especially in the digital age. Yodlee owned this space and had well over a decade head start on Plaid. One of the critical elements of Plaid’s success was their commitment to focusing on API first. This proved to be the game changer for them. They never veered from this strategy as their North Star.
- Tech is great but people matter. One of the other keys to Plaid’s success is their hiring strategy. Similar to 11:FS, they only strived to hire A players. They were picky about who they brought on. Zack and Will deserve credit for sticking to this philosophy as they went through rapid growth as they gained success. I do wonder what impact Zack’s time at Bain influenced their hiring practices.
- Plaid stuck to their core business model. The acquisition of Quovo reflects this. It simply made sense to acquire a great competitor and they blended them in rather seamlessly it appears. Rounding out their client portfolio with this acquisition had to also be appealing to Visa.
As far as my thoughts on the business rationale for Visa:
- The obvious answer is Plaid’s relationship with the US Fintech market. This is incredibly deep and has been built up over the life of the company. This provides Visa the opportunity to offer services and work with a large market with a large potential for growth.
- This move cements Visa even further into the US (and potential other global markets as it will look to expand Plaid’s offerings) FI space. The wonderful under the glass “plumbing” of financial services is a great place to be for service and solution providers. The almost invisible connectivity to consumers and businesses but one that provides vital services in our highly connected lives. Great space for Visa to further plant themselves.
- And the most obvious answer. Data, or better, actual actionable data, is power in the digital age. This is yet another great data access point to consumer and business data for Visa.”