Visa exits $5.3 billion Plaid buy, leaving data-sharing standards up to regulators

• Visa-Plaid deal is a no-go, dimming prospects of data-sharing unification.
• The DOJ’s antitrust lawsuit against the deal spurred Visa’s decision, highlighting the need for government-led data sharing standards. 
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Visa’s exit follows a lawsuit filed by the Department of Justice (DOJ) in November challenging the $5.3 billion takeover of data aggregator Plaid, which was first announced almost exactly one year ago, per The Wall Street Journal.

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The DOJ alleged that the acquisition would give Visa a monopoly in the online debit card market and limit competition in the payments industry. Plaid CEO Zach Perret said in a statement that the company will work with Visa as an investor and partner going forward.

The termination could delay Visa’s entry into open banking in the US, which likely stings even more as Mastercard sails into the space with its purchase of data aggregator startup Finicity. The DOJ greenlit the $825 million acquisition in November, an unsurprising move given Mastercard’s much smaller share of the online debit market.

Finicity’s open banking prowess will allow Mastercard to offer its customers greater control over usage of their data, strengthen its open banking platform, and provide more financial services options. With the Plaid deal off the table, Visa will have to find another means of doing the same.

The DOJ’s apparent distaste toward the idea of an open banking giant will perpetuate the fragmented US open banking environment—leaving the door open for regulators to implement a standardized approach.

• Consumers’ access to financial data sharing in the US has largely depended on private-sector efforts. For example, Plaid is a member of the Financial Data Exchange, a 168-member financial industry consortium that has adopted its own data-sharing principles. But consortia carry no regulatory obligations to comply, and they don’t preclude other standards from popping up: A number of banks are making another play with Akoya, a financial data-sharing startup. The Visa-Plaid tie-up could have been big enough to force unity across the financial services industry—but the DOJ shooting it down suggests that a centralized regulatory approach will in fact be necessary.
• Standardized rules would make data sharing more convenient for customers and ease banks’ implementation of open banking. The Consumer Financial Protection Bureau (CFPB) has been working to determine how consumers’ access to their financial information is regulated. And Insider Intelligence expects that the soon-to-be Biden-led agency will fast-track legal standards around open finance. If the CFPB drafts rules that mandate greater consumer control over their own financial data, it could spur a vast array of new services and help consumers take better control of their financial lives. And for banks, a regulated approach could make it easier to implement open banking-enabled products, as they will only need to follow a single standard.

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