Big news, $5.3B big. Everybody has takes, including Visa themselves, on why fintech infrastructure is more important than DTC fintech. We’re all geniuses in hindsight.
Unsurprisingly, Ben Thompson has one of the best explanations of the rationale [paywall]. It ties back to the power of a network that can not only provide read-only access to your money, which is what Plaid offers. The future is programmatic read and write access.
Visa today sits in the middle of a 3 sided network.
- Merchants – who offer products and benefit from a network that extends credit and fixed payment terms
- Consumers – who need credit and convenience
- Banks – who have money to extend credit
Plaid today sits in the middle of a read-only 3 sided network, a threat and opportunity to Visa’s business
- Consumers – who want modern access to their finances
- Banks – where money resides and earns interest, is lent/borrowed/etc…
- Developers – building new financial products
Today, Plaid dominates in the read-only use case for developers. Tomorrow, and what drove the acquisition premium is a read+write network that Visa can operate alongside it’s current one. Ben Thompson’s explanation:
More importantly, though, is the power of inertia: as long as it is hard to move money around, the more likely it is that that money will stay in the bank, collecting minuscule interest; or, if customers need value-added services, the path of lowest resistance will be simply getting them from their bank.
An API-based world could change this dramatically: suddenly consumers could commission robo-advisors to move their cash to whoever is offering the best rates, or to automatically refinance debt. Value-added services from multiple vendors would be equally easy to access, meaning they would have to compete on price or terms. In other words, much like the open Internet, banks fear that profits will be rapidly transformed into consumer benefit.Ben Thompson
Plaid’s founders, team and investors are huge winners obviously. The secondary effect is the rising tide this will provide to the next wave of fintech infrastructure players like Astra, Alpaca & SynapseFi.