Back in January, Visa saw a coveted acquisition slip through its fingers. The financial services company had agreed to acquire the fintech startup Plaid for $5.3 billion. Regulators alarmed that Visa may have acquired Plaid to remove a threat from the arena, signaled they would heavily scrutinize the deal. Plaid wisely decided that they couldn’t afford to wait indefinitely for an uncertain outcome. pulled out of the deal.
And a few months later, Plaid raised $425 million at a $13.4 billion valuation. That’s more than 2.5X the valuation of the Visa deal that never was. This deal left Plaid looking pretty smart (and lucky) and Visa with egg on its face.
Fast forward to last week. Visa announced plans to acquire Tink, a European open banking platform, for 1.8 billion euros, or about $2.13 billion. Visa said it would finance the deal with cash on hand.
Trading Plaid for Tink hardly a one-for-one swap. Different companies. In different markets. With different valuations. But the deal does signal that Visa isn’t giving up on its mission to adapt to the rapidly shifting sands, driven by a massive wave of fintech innovation around the globe.
Visa positioned its latest acquisition as a triumph for open banking in Europe. The company spins the deal as a combination of complementary capabilities. Visa brings strength in areas like cybersecurity and fraud prevention. Meanwhile, Tink brings its API, technology, and customer relationships.
“Visa is committed to doing all we can to foster innovation and empower consumers in support of Europe’s open banking goals,” said Al Kelly, CEO, and Chairman of Visa. “By bringing together Visa’s network of networks and Tink’s open banking capabilities we will deliver increased value to European consumers and businesses with tools to make their financial lives more simple, reliable, and secure.”
Open Banking?
A fair question at this point might be, “What is open banking?” Essentially it combines the API economy, open-source software, and data transparency to allow third-party developers to build financial applications. It’s the foundation of much of what is going on in fintech and the movement toward greater financial inclusion.
For something a bit more precise, we turned to Investopedia.
“Open banking is a banking practice that provides third-party financial service providers open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through the use of application programming interfaces (APIs). [And] open banking will allow the networking of accounts and data across institutions for use by consumers, financial institutions, and third-party service providers. [Finally], open banking is becoming a major source of innovation that is poised to reshape the banking industry.”
if you study this definition, it’s easy to see how traditional banks might get indigestion whenever someone utters the term “open banking.” The smarter among them might decide it’s time to get in the game. And for organizations with more money than innovative DNA, acquisition is their ticket to the party.
What’s a Tink?
Tink got its start in Stockholm in 2012. The company, according to its website, “enables banks, fintechs, and startups to develop data-driven financial services. Through one API, Tink allows customers to access aggregated financial data, initiate payments, enrich transactions, verify account ownership and build personal finance management tools.”
So I guess that makes it a platform that any company can use to create financial services. However, its website makes it clear that its customer base is mostly in the banking and payments space. It lists names like PayPal, ABN-Amro, and American Express.
Tink’s platform connects to more than 3,400 banks that reach over 250 million bank customers across Europe. The company has 400 employees and operates in 18 European markets.
Spurred by Regulation
Regulation has spurred the adoption of open banking in Europe. And this seems to have played a role in motivating this acquisition. Visa seems to need the capability Tink offers to operate in Europe.
European Union law requires banks to provide access to registered third-party providers access on behalf of, and with the consent of, their customers. As a result, banks, fintechs, developers, platform players, and merchants, are using open banking solutions to give consumers more choice in how and where they share their financial data. Tink is one of more than 440 third-party providers across Europe providing open banking services.
