Visa's Pursuit of Plaid Looks Too Much Like Facebook-Instagram


One of the key themes in the antitrust proceedings against Big Tech this year centers on the idea that the U.S. was too shortsighted in allowing the biggest technology companies to maintain their monopoly power by swallowing up emerging competitors and absorbing their technology. On Thursday, regulators signaled that they are determined not to make that mistake again, at least when it comes to Visa Inc.’s $5.3 billion planned purchase of Plaid Inc.

The Department of Justice’s antitrust division filed a lawsuit against Visa to block its takeover of the fintech startup, contending the deal would “eliminate a nascent competitive threat” to the payment giant’s business and allow it to preserve its monopoly position in the debit-card market. Visa, in a press release, said the suit is “legally flawed” and reflects a “lack of understanding” of Plaid’s business. The company emphasized the startup is not a payments company but a data firm that allows consumers to access their financial information from other third-party apps.

Visa is not wrong in its current description of Plaid. The startup doesn’t have a payments offering today and is primarily a data-focused operation. Plaid basically does the technical plumbing, connecting app developers and financial institutions. But the government is taking a longer-term view on what Plaid may be able to do in the future. 

The DOJ’s stance seems plainly informed by last month’s U.S. House antitrust subcommittee report, which implied the Federal Trade Commission didn’t think far enough ahead in allowing Facebook Inc. to buy Instagram for $1 billion eight years ago. Back then, Facebook CEO Mark Zuckerberg was able to see the potential of the plucky photo-sharing startup before it became the social media powerhouse it is today. Now, with the benefit of hindsight, the government has been widely criticized for not seeing what was possible with Instagram’s 30 million user base at the time.

Visa-Plaid fits the same playbook as Facebook-Instagram. Like Facebook with social media, Visa clearly dominates the payment and debit-card markets. In its latest fiscal year, the company said its network conducted more than 185 billion transactions and $9 trillion in payment volume, along with acceptance at nearly 70 million merchant locations.

Visa's Pursuit of Plaid Looks Too Much Like Facebook-Instagram

And like Instagram in photo sharing eight years ago, Plaid has reached a level of scale and traction in the market that will be difficult to replicate. The startup already provides connections for more than 11,000 banks, 200 million consumer bank accounts and 2,600 apps. In a January presentation, Visa said Plaid was a “best-in-class” platform with 80% share in working with the largest U.S. financial-technology apps. 

Stopping Visa from buying an emerging upstart that in time will likely be a strong rival in the online payment business is a good move for markets and competition. It’s thinking ahead. As hockey legend Wayne Gretsky says, “Skate to where the puck is going, not where it has been.” Gretsky would be proud.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.

©2020 Bloomberg L.P.

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