A couple of days ago, Plaid, a fast growing FinTech company that lets users connect their bank accounts to a variety of financial services, announced that it was being acquired by Visa for $5.3B.
The first thought that came to my mind is that I wished Plaid would have rather been acquired by a large blockchain company, like Coinbase. The only issue is that $5.3 Billion is a hefty price for even the largest of blockchain companies, whereas it’s only a digestible bite for a behemoth like Visa.
Many analysts referred to Plaid as “FinTech plumbing”. For me, Plaid symbolized more than plumbing. It was an essential on-ramp/off-ramp component that enabled consumers to loosen their reliance on banks. I have previously written about and continue to believe that FinTech, DeFi, and blockchain-based financial services are allowing us to gradually depend less and less on large banks as our primary financial services providers. In Banks as Back-ends: The Decentralization Has Started (January 2016), I gave examples of that trend, asserting that the decentralization of banking is already here, but it hasn’t been evenly distributed yet.
I became aware of Plaid in the past years as it is used by some cryptocurrency wallet providers to provide an essential on-ramp to bank accounts. Basically, Plaid users connect their bank account to participate in off-banks personal finance, payments, lending, brokerage, wealth management, and a plethora of ancillary financing services. Plaid’s metrics were impressive: they signed-up 11,500 banks/credit unions and touched more than 20 million consumers via popular apps like Venmo, Robinhood, Betterment and 2,500 others.
Of course, FinTech broadly is a big culprit in this unstoppable finance decentralization trend, but I had wished that the companies leading this trend (such as Plaid) would not be swallowed by incumbents.
I don’t know the Plaid team, and I congratulate them on this amazing exit. At the same time, I’m a little apprehensive because we all know too well how these types of acquisitions typically end. Will Plaid services continue to flourish as before providing more freedom to consumers, or will that service become eventually suffocated and dictated by what’s important for Visa before what’s important for decentralized finance?
When big companies think of innovation, it doesn’t mean the same as when startups do. Big companies are restrained and chained by their current business models, and everything gravitates towards, and aligns behind their existing strategies and direction. This means that innovation will be boxed-in instead of flying according to its own path.
Just imagine for a moment how different the significance of this acquisition might have been if Coinbase had acquired Plaid, and not Visa.
I see this acquisition as another successful FinTech company that was supposed to give users freedom from big banks, yet it is brought back under the claws of big Fin.