[HN Gopher] Visa and Plaid Abandon Merger After Antitrust Divisi...
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Visa and Plaid Abandon Merger After Antitrust Division's Suit to
Block
Author : theBashShell
Score : 191 points
Date : 2021-01-12 21:24 UTC (1 hours ago)
(HTM) web link (www.justice.gov)
(TXT) w3m dump (www.justice.gov)
| runako wrote:
| Would be Stripe's largest acquisition to date, but their private
| market valuation would make it affordable if paid for mostly with
| stock.
| bnchrch wrote:
| Finicity is already a great alternative to Plaid.
|
| I imagine bottles of champagne are popping at Mastercard HQ right
| now.
| nawgz wrote:
| I think this was well played by the gov't, the idea of Visa and
| Plaid merging is really clearly going to reduce competition in
| the payments space
| theonlybutlet wrote:
| Glad to see they're starting to flex that antitrust muscle a
| little bit, it's been atrifying over the past few decades.
| paxys wrote:
| It would have gone through had Visa's CEO not been so honest at
| the time of the merger announcement saying that they intended to
| use Plaid's data to get a leg up on their competitors.
|
| > The DOJ cited Visa CEO Al Kelly's description of the deal as an
| "insurance policy" to neutralize a "threat to our important US
| debit business."
| chaorace wrote:
| I don't even think it's a data issue. He literally says they
| bought Plaid because they're a threat. That's textbook anti-
| competitive behavior and a big smoking gun when it comes to
| anti-trust cases.
| paxys wrote:
| They said both I believe. Them having access to all their
| competitors' data through Plaid was a big concern when the
| acquisition was announced.
| CamelCaseName wrote:
| Such a poor comment from Kelly that I almost wonder if it was
| intentional.
| breck wrote:
| I'm surprised by this. I used to work in Foster City.
|
| The joke on the campus was that VISA stood for "Very
| Inconspicuous Spy Agency".
|
| You'd think that there wouldn't be this kind of miscommunication
| in the chain of command.
|
| All jokes aside, I'm very curious to check out Plaid now because
| I didn't pay attention when it was independent and Visa is a
| *very* smart organization, so Plaid must be something special.
| ryanwhitney wrote:
| It's like oauth except you type your password for site A into a
| box on site B's domain
|
| Pretty wild it even exists
| toomuchtodo wrote:
| It is a hack around regulatory failure to mandate this
| functionality at finance firms (both Congress and the Fed
| have failed in this regard). The Fed's instant payments
| product (FedNow [1]) goes live in 2023, which is going to put
| downward pressure on Visa's debit business. The Fed only
| began to move on instant payments when pressured by Congress
| [2] (who didn't want smaller banks held hostage by Early
| Warning System's "Zelle" product, which is operated by a
| consortium of the nation's largest banks).
|
| Europe mandated this functionality (PSD2) [3]. With instant
| payments and if regulations required banks to offer this
| functionality, Plaid's value would evaporate.
|
| [1] https://www.frbservices.org/financial-
| services/fednow/index....
|
| [2] https://www.paymentsjournal.com/timeline-the-feds-real-
| time-...
|
| [3] https://en.wikipedia.org/wiki/Payment_Services_Directive
| runako wrote:
| Does FedNow solve all of the problems Plaid solves? I'm
| thinking specifically about Plaid functionality that lets
| consumers expose transaction history, investments, etc.
|
| It would appear that FedNow solves for "How do I get money
| into my Schwab brokerage account?" but not "How can I let
| Schwab do risk analysis across all my investment accounts?"
| toomuchtodo wrote:
| It does not, which is why I mention Europe's PSD2, which
| would. You don't build a startup to do this, you mandate
| your financial institutions to provide this functionality
| to users.
|
| Baby steps!
| schnable wrote:
| You'd think even without a mandate, banks would be
| motivated to implement secure auth instead of this
| insanity?
| madamelic wrote:
| >Plaid must be something special.
|
| It's not so much that Plaid is "something special" but that US
| banks are stuck in the 1950's technologically.
|
| Plaid shouldn't exist. It only exists because banks refuse to
| create open APIs for others to integrate with.
|
| With that said, Plaid has done a fantastic job.
| ceejayoz wrote:
| > It only exists because banks refuse to create open APIs for
| others to integrate with.
|
| Mostly true, but both Capital One and Citibank have OAuth
| APIs. It's lovely.
| rizpanjwani wrote:
| Never used Plaid but didn't they require your banking
| credentials and also didn't have a very secure mechanism for
| storing them?
| jerry80 wrote:
| Yes. Plaid can be used to verify banking details (many
| stock brokers use it for this, for example).
|
| Plaid works by asking the user to give their banking
| username and password to Plaid, and then their two factor
| authentication token too. Plaid logs into their account
| behind the scenes to verify ownership.
|
| Plaid claims to not store this info, and I assume that they
| don't, but it still seems like one of the biggest security
| anti-patterns ever. If nothing else, it's training users to
| ignore the "don't share your password" warnings. Do we
| really want users trained to be more susceptible to
| phishing?
| pg_bot wrote:
| This seems to be changing. Nacha (the organization that
| governs ACH) has been developing open APIs so that more
| organizations can get access to the ACH network without any
| dirty hacks. I would expect to see a rise in the number of
| personal finance applications over the next few years due to
| this fact.
|
| https://www.nacha.org/content/available-apis
| https://www.nacha.org/content/phixius
| vageli wrote:
| Mercury bank seems to be a standout in this regard, promoting
| themselves as a "full stack" bank.
| jamestimmins wrote:
| Whatever you think about Visa or this merger, this would be a
| major disappoint to Plaid's team members who thought they were in
| for a huge financial windfall.
|
| If that applies to anyone here, my sympathies and best of luck
| figuring out what's next for Plaid. Hopefully the morale hit
| isn't too big on the team.
| save_ferris wrote:
| The vast majority of tech workers that receive equity stakes in
| pre-IPO/acquisition companies don't ever see any financial
| windfall from their stakes. These guys will be just fine.
| ProAm wrote:
| Are they not a profitable standalone company? Tired of startups
| running at a net loss to pray for acquisition that ultimately
| is worse for their customers.
| garyrichardson wrote:
| Agreed, except for one point.
|
| Please don't call it a windfall. Anyone in that company that
| would have seen life changing amounts of money has likely put
| incredible effort and hard work into making this happen.
| jamestimmins wrote:
| Interesting, I just thought a windfall meant "a lot of money
| at once", but it looks like you're right that it implies
| luck. So agreed, a different word would be more accurate
| here.
| roflc0ptic wrote:
| I mean, nobody reasonably joins a startup and expects to make
| buku bucks. It's "unexpected good fortune" from my
| perspective, and certainly seems to qualify as a windfall.
| delecti wrote:
| "Buku"? Beaucoup?
| wrsh07 wrote:
| Yes, it's an intentional misspelling
| supernova87a wrote:
| Well, maybe it isn't a "windfall" to someone who lives in the
| tech world and comes to expect such good fortune and thinks
| their effort should be rewarded in an outsized way. I'm sure
| we think it's deserved in a relative sense.
|
| But it is most definitely a windfall to the rest of the world
| (even the rest of the country), who work equally hard, under
| worse conditions, for their entire lives and cannot even hope
| to earn say 1/5 the wealth that a tech worker can accumulate
| after his/her first job.
|
| To have a payday of millions of $ fall out of the sky, for
| toiling the same as others trying to make a living, yet also
| being lucky to be in the right place and the right time to
| have it rewarded.
| Grimm1 wrote:
| It's almost like startups have non technical workers that
| also have an equity stake in the companies they work for.
| This comment strikes me as almost entirely out of touch. No
| one expects these results, most people never see a startup
| they work for successfully exit let alone to the tune of
| billions.
|
| "Being in the right place at the right time" sure it's
| partly that but if you think you're getting there without
| some really hard work you'd be sorely mistaken.
|
| Also startups everywhere need good folks to work for them
| it's not like this is some secret club to get into, many
| people just have no risk tolerance for one reason or
| another.
|
| You're line of thinking really get's at me because the
| reality is a lot more than luck goes into things even if
| the current popular line of thinking is to suggest
| otherwise.
|
| Especially on a community that was established initially to
| talk about startups.
| jdavis703 wrote:
| The windfall typically isn't anywhere close to millions of
| dollars for regular employers. We're talking about payouts
| on the level of buying a new car or placing a down payment
| on a home.
| MaxHoppersGhost wrote:
| I'm sure those wannabe monopolists will be fine and something
| else will come along. The rich always get richer.
| tempsy wrote:
| Uh no.
|
| Plaid is probably worth much more now than it was when it was
| acquired. The entire market has become much more frothy.
|
| I would not be surprised if it could command a $10B+ valuation
| as a standalone company.
| AlexandrB wrote:
| This comment strikes a nerve with me - perhaps because it's
| "saying the quiet part loud". I thought the typical goal of
| hackers and startups was to "change the world" and "make a
| difference". How does selling to Visa accomplish those things?
| Isn't expressing sympathy with Plaid's staff for not getting a
| payout effectively saying "sorry that you might actually have
| to deliver on the lofty promises this time"?
|
| It's also kind of indicative of how small startup ambitions
| have become. Acquisition has become a measure of success, not
| failure.
| paxys wrote:
| There is no "typical goal" in tech or anything else.
| Different people want different things in life.
| jamestimmins wrote:
| This makes it sound like something dirty.
|
| Tech workers want to buy homes and go on vacations just like
| everyone else. That's a good thing. They had an opportunity
| to make a lot of money making banking services easier for
| everyone; that's awesome and should be encouraged.
| madeofpalk wrote:
| > I thought the typical goal of hackers and startups was to
| "change the world" and "make a difference"
|
| I care so little about "changing the world" or "making a
| difference". Those things don't pay the rent.
| rconti wrote:
| I've been through 1.5 IPOs and 1 acquisition.
|
| In only one of those cases, did I join the company expecting
| an imminent-ish liquidity event. One hit me out of nowhere.
| Regardless of what you're planning on, and even if the dollar
| amount isn't that great, it's a huge rush, a lot of thinking
| about the possibilities. It would suck, at the very least, on
| an emotional level, to have that fall apart.
| Operyl wrote:
| To be fair, Visa would've had the partnerships with banks to
| really push for standard API access to various banks. Plaid
| works by giving them your username and password in most flows
| (although some banks like Chase finally have an authorization
| flow without MITM).
| _jal wrote:
| > I thought the typical goal of hackers and startups
|
| Pretty sure that ship sailed a couple decades ago. If you
| want to change the world, work for Pro Publica or the EFF.
| You won't be buying that spare Tesla, though.
| JMTQp8lwXL wrote:
| The rank-and-file employees that work for companies like this
| have other goals, like buying houses and saving for
| retirement, it's not a single dimension. Yes, they want to
| help the world but not at the expense of themselves and their
| own financial future.
| jkaplowitz wrote:
| That's often true for startup founders too. However
| mission-driven some of us are, we still live in a
| capitalist world with bills to pay.
| cheriot wrote:
| Plaid has ~500 employees with normal lives and financial
| goals. There are start-ups out there with a real chance to
| change the world, but I think it gets over played as a form
| of recruiting and media strategy.
| marcinzm wrote:
| >I thought the typical goal of hackers and startups
|
| Hackers and startups are two very different groups with very
| different ideologies and goals and incentives. No idea why
| you group them together. Some startups have no technical
| founders even.
|
| >"change the world" and "make a difference"
|
| Startups are businesses and like all businesses in the end
| they wish to make money. VCs, for example, are very clearly
| investors and not philanthropists. They are high risk, high
| reward businesses which means they need to change things to
| get those returns but in the end they are a business.
|
| >How does selling to Visa accomplish those things?
|
| It gives Plaid financial stability and long term platform for
| its technology. If its technology makes the world a better
| place then its continual existence does make a difference.
| psanford wrote:
| Visa was going to pay $5.3b dollars for Plaid. I don't really
| think you can say that that is "small startup ambitions."
|
| Is YouTube a failure? Is Instagram a failure? How about
| Github or Linkedin? There are reasons to remain an
| independent company, but there are also reasons that it might
| be better to be acquired. Besides the premium that the
| acquirer will pay, large companies can actually accelerate
| your growth while also insulating you from a lot of the pesky
| overhead of being a public company.
| throwawayacct8 wrote:
| Can attest that some employees and ex-employees took a decent
| tax hit by exercising NSOs after the acquisition was announced
| at the $5.3 valuation price.
| [deleted]
| hnxs wrote:
| I wonder if employees with equity will see any portions of the
| breakup fees as some sort of bonus.
| perpetualpatzer wrote:
| Was there a breakup fee on this one? I'd expect it's pretty
| standard to waive that when it's due to unforeseen regulatory
| obstacles.
| [deleted]
| paxys wrote:
| They'll get some $$$ out of it, and I have no doubt that they
| have a solid future as an independent company. The fintech
| sector is red hot right now. Heck they might even be able to
| catch the next IPO wave.
| RobRivera wrote:
| SPAC SPAC SPAC SPAC SPAC
| monkeydust wrote:
| Not sure why that was downvoted, there is a glut of funded
| SPACs and more on horizon who would love to take Plaid
| public.
| ChrisArchitect wrote:
| Guess this is related:
|
| Plaid blog post 'The Year Ahead' https://plaid.com/blog/the-year-
| ahead/ (https://news.ycombinator.com/item?id=25754256)
| borski wrote:
| That breakup fee is good $$$ though
| andjd wrote:
| That Visa isn't fighting this should validate that the
| government's antitrust enforcement has been lax. For a merger
| valued in billions of dollars, hiring even the best lawyers for a
| long fight would have been a rounding error. The only way this
| happens is for Visa's lawyers to think that the government would
| likely win.
| PragmaticPulp wrote:
| It is strange that they're not fighting it harder. I wonder if
| Plaid identified a better exit strategy?
|
| Or if Visa is having some buyer's remorse over the $5 billion
| price tag and saw this as an easy out?
| sshah1983 wrote:
| My guess is that that Plaid will go public via a SPAC deal now. I
| think it's highly likely GSAH (Goldman Sachs Acquisition
| Holdings) is that SPAC that does a deal. They have $750M to play
| with and given Visa was going to buy Plaid for $5.3B, the numbers
| kind of make sense.
| phpsuks wrote:
| Or may be PSTH.
| ashraymalhotra wrote:
| Important to note that there is no break-up fee that Visa (or
| Plaid) will pay.
|
| Source:
| https://www.bizjournals.com/sanfrancisco/news/2021/01/12/vis...
| vinhboy wrote:
| It is still called a "merger" if one company is buying out
| another company. Don't we normally call that an acquisition?
| [deleted]
| nceqs3 wrote:
| There is no legal process of an "acquisition". When somebody
| says acquisition they really mean reverse triangular merger.
|
| See https://witnesseth.typepad.com/blog/reverse-triangular-
| merge...
| itsnot2020 wrote:
| Well as both a Visa card user and Plaid customer I suppose I'm
| happy about this!
| wh-uws wrote:
| Finally some antitrust enforcement!
|
| This was clearly going to be anti competitive and bad for
| consumers.
|
| Plaid has a great product and will either spac / ipo or be a
| great acquisition target for someone else.
| d33lio wrote:
| It blows me away our legal system can prevent this but not a tech
| social media plutocracy?
| lovecg wrote:
| Baby steps.
| thiscatis wrote:
| Looking at this from an opionated Open Banking side here in the
| UK, this is a good thing.
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