What's going on?
Visa agreed on Thursday to buy European fintech firm Tink for $2 billion, in what may be a smart bid to block competitors from bypassing the payment giant’s card network.
What does this mean?
“Open banking” platforms like Tink’s have caught on across Europe ever since new rules aiming to improve consumer choice came into force in 2018. Its technology allows third-party firms to access people’s banking data directly – with their consent, obviously – and to get an overview of their financial position without paying the likes of Visa for the privilege.
Visa, meanwhile, has been looking to expand beyond traditional payment methods, while keeping newfangled rivals from cutting into its lucrative role as middleman. The acquisition will help the company stay close to the more than 3,400 European banks that Tink services – along with the data of their combined 250 million customers.
Why should I care?
For markets: Second time lucky?
Investors sent Visa’s share price higher following Thursday’s announcement, potentially encouraged by the fact that its cash payment for Tink won’t impact stock buyback and dividend plans. But the takeover isn’t a done deal yet, and Visa’s recent attempt to acquire Tink’s US rival Plaid for $5 billion was blocked by regulators for competition-based concerns that could also apply here. That wouldn’t be so terrible for Tink, mind you: Plaid’s valuation tripled after Visa’s merger plans fell through.
The bigger picture: Keep the check, America.
Open banking – still yet to arrive in earnest in the US – has been a big factor behind Europe’s fintech boom. Startups like Revolut and Adyen have attracted multibillion-dollar valuations, and British payments firm Wise announced plans last week to list its shares in a move that could value the company at as much as $12 billion.