Visa purchased Swedish fintech Tink for $2.1 billion
Jul 20, 2021
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Visa agreed to pay 1.8 billion euros ($2.1 billion) for Swedish financial technology start-up Tink in a transaction aimed at strengthening the payment giant's digital aspirations.The agreement comes after U.S. officials rejected Visa's plan to acquire Plaid, an American competitor to Tink. Plaid has subsequently decided to go it alone as an independent company and was last valued privately by investors at $13.4 billion.
Plaid and Tink both operate in the fledgling field of enabling banking, which requires lenders to grant third-party businesses access to prized consumer financial data in exchange for consent. Because of new regulations, open banking has grown in the United Kingdom and the European Union.
“Visa is dedicated to doing everything we can to encourage innovation and empower customers in support of Europe's open banking goals,” said Al Kelly, CEO of Visa.
Tink, which was established in 2012 as money management software by the Swedish businessmen Daniel Kjellén and Fredrik Hedberg, focused on technology delivery to other companies. The business, which was launched in Stockholm in 2012employs around 400 people and has technology that links to over 3,400 institutions, reaching over 250 million bank clients across Europe. Tink's technology, like it’s implied and shown on this website, enables banks and fintech companies to collaborate with over 3,400 lenders to develop innovative financial solutions. The Stockholm-based firm was last valued privately at 680 million euros. It has attracted more than $300 million in funding from investors like PayPal, SEB, and ABN AMRO.
“As we came to know about Visa, it became obvious that we have a shared purpose - to link the finance sector and drive the growth and acceptance of digital financial services,” stated Tink's founders in a blog post.
“By collaborating with Visa, we will be able to go quicker and reach further than ever before, and we believe Visa is the perfect match for the next step of our path.”
The acquisition of Tink by Visa is the most recent in the huge payments business in a sequence of consolidation actions for the sector which is linked to the payments. The business attempted to purchase Plaid last year but was forced to terminate the deal when the US Department of Justice moved to prevent it on antitrust grounds.
The transaction with Tink is subject to regulatory clearances and other normal closing circumstances, according to Visa, who said that it would be financed entirely with cash and will have no influence on the company's stock repurchase program or dividend policy.
Tink's branding and management team will be retained following the transaction, according to Visa, and the company's headquarters will stay in Stockholm.
Following the failure of its purchase of San Francisco-based open banking startup Plaid, this is Visa's second effort to grow beyond its core business of card payments. Founded in 2012 in Stockholm, the company initially aimed at developing a personal finance app but now utilizes its technology to support over 300 European banks and Fintech in the development of products from the aggregation of financial consumer data.
"We discovered Tink as a powerful partner to drive open banking innovation in the interest of our common customers, the residents of the United Kingdom and the European Union and to invest in high-skill digital employment across the continent," Charlotte Hogg, CEO of Visa Europe, stated in an announcement.
This purchase remains subject to regulatory consent and comes only six months after the US Department of Justice has launched an antitrust complaint with Visa's $5,3 billion acquisition of Plaid. The DOJ officials said that the agreement will decrease competition and 'take away this creative alternative to visas and increase entrance hurdles for future developers from American businesses and customers.'
Simon Taylor, head of Ventures & Co-founder at the financial technology firm, warned that the Tink transaction may raise similar issues for anti-trust watchdogs in Europe. "Is Visa seeking to avoid competition with its main payment company with this acquisition? Account payments may be less than card payments for both individuals and companies, which in turn entails fewer visa revenues."
Tink was one of 440 financial services companies in Europe, and the continent's regulatory framework was significantly different from the U.S. Visa. In recent years, Tink and numerous other European fintech companies have emerged from European rules forcing banks, in an effort to boost competition, to share their financial information with third-party companies.
Investors valued Plaid in the first round of financing for the Fintech start-up after their sale to the company Visa at $13.4 billion, signaling a comeback in fortune following the US Government suing to stop the acquisition on grounds of antitrust.
The worth of the new assets raised in Plaid is almost triple that of $4.9 trillion in cash and Visa agreed in January of last year to give the firm.
The latest funding gathering demonstrates how investors have challenged providers of infrastructure technologies that assist firms to manage their data and financial interactions.
Plaid offers an application programming interface or API for client bank account links to Fintech firms such as Robinhood and Venmo. When new customers register for services, the firm earns money.
In November Visa's planned acquisition of Plaid was said to be meant to remove a competitive threat to online debit payment monopolies. In January, Plaid and Visa, which contested the claims of DoJ, decided to conclude the transaction citing the risk of 'lengthy and complicated litigation.'
Zach Perret, CEO of Plaid, told the business that the choice to retain the independence of the company was his confidence.
"When we signed this agreement and decided to go our own ways, our company changed enormously," he added. "We have altered our industry significantly, and the chance before us has also been compounded."
Plaid claimed that last year its client base rose 60 percent, but declined to disclose sales. The DoJ claimed Plaid raised over 100 million dollars in 2019.
The DoJ said Plaid had planned to establish a "banking-linked payment network competing with Visa" to comply with their allegation. Perret claimed the firms were not competing and had official collaboration negotiations.
"We are working to develop financial services infrastructure, whereas Visa is focused only on trade," he added.
Perret indicated that Plaid will ultimately contemplate a public offering but was not "on the horizon soon." Also participating in the latest round of investment were previous Plaid investors like Andreessen Horowitz and Index Ventures. No shares were sold by employees and investors.