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June 24, 2021updated 25 Jun 2021 10:07am

Visa: Tink €1.8bn open banking deal won’t face disastrous Plaid fate

By Eric Johansson

Payment processing giant Visa has announced plans to acquire Swedish open banking startup Tink, despite regulators torpedoing a similar deal with fintech Plaid.

Open banking refers to a nascent fintech sector where banks share their data with third party providers and vice versa. It is often seen as a way to improve the products and to create opportunities for new startups to enter the world of financial services, which brings us back to Visa and Tink.

“This acquisition is a sign of our commitment to Europe,” said Charlotte Hogg, CEO of Visa Europe. “In Tink, we have found a strong partner with whom we can accelerate innovation in open banking for the benefit of our collective clients and the citizens of the UK and the EU, while investing in high-skill tech jobs on the continent.”

While the two soon-to-be partners are clearly already in a celebratory mood, this is by no means a done deal, especially as Visa has been burned before.

In January 2020, Visa announced plans to acquire open banking startup Plaid for $5.3bn. However, US regulators soon threw a spanner into the mix.

The US Department of Justice feared the deal would enable Visa to use its market dominance to “eliminate a nascent competitive threat” to the financial giant. At the start of 2021, the DoJ put an end to the deal.

At the time, Visa chairman and CEO Al Kelly maintained that the company was “confident we would have prevailed in court as Plaid’s capabilities are complementary to Visa’s, not competitive” but that it wouldn’t pursue further legal action.

“[It] has been a full year since we first announced our intent to acquire Plaid, and protracted and complex litigation will likely take substantial time to fully resolve,” he added.

Now, Visa has announced plans to buy Tink, arguably a European version of Plaid. The announcement of the €1.8bn deal raises questions about whether Visa and Tink worry that history may repeat itself.

“For that type of question you need to call Visa,” Mattias Lindquist, PR and communications director at Tink, tells Verdict.

When Verdict reaches Visa, its press officer downplays the risk that the Tink deal would suffer the same fate as the scuppered Plaid deal, maintaining that the payment giant was in the right when it came to Plaid.

The argument basically boils down to the open banking landscape in the US and in the EU being very different thanks to the EU’s second Payments Services Directive, or “PSD2”.

The law was introduced in 2015, paving the way for open banking by forcing banks to give up their monopoly on the digital information they have on customers.

As a result, Tink is one of 440 open banking providers in Europe. Other fintech startups in the sector include TrueLayer, Railsbank and Yapily.

Visa’s acquisition of Tink is still pending regulatory approval.

What is Tink?

CEO Daniel Kjellén and CTO Fredrik Hedberg founded Tink in 2012 with the aim to create an application programming interface, or “API”, which would enable banks and other financial services providers to connect their transactional data feeds.

Tink is part of a wave of Swedish fintech giants that include open banking company Trustly, neobank Northmill and buy-now-pay-later (BNPL) giant Klarna, which achieved a $45.6bn valuation on the back of a $639m SoftBank-led investment round earlier in June. There are an estimated 380 fintech businesses in Sweden, according to company tracker Tracxn.

“This is obviously really great and another recognition of the Swedish fintech industry,” Louise Grabo, Secretary General at the Swedish FinTech Association, tells Verdict in regards to the Tink/Visa deal.

Since its launch almost a decade ago, Tink has grown to 400 employees, to operate in 18 markets, to support over 3,400 banks and over 250 million banking customers.

Tink has raised $308.4m in venture capital to date. Most recently it raised a €90m round in January 2020 that was then extended by €85m in December. The extension pushed its valuation past the $800m mark, according to GlobalData.

Tink’s investors include PayPal, Dawn Capital, HMI Capital, Insight Partners, Poste Italiane, Heartcore Capital, ABN AMRO Ventures and BNP Paribas-owned Opera Tech Ventures.

It has also partnered with companies like American Express, NatWest and Nordea.

“The collective hard work of everyone at Tink is about to change the shape of the financial services industry forever,” the founders said in a blog.

“It is clear that we have all built something truly incredible at Tink, which has had a tremendous impact on our customers, on consumers and on society at large. But it’s also clear that we’ve only scratched the surface and that we’ve just gotten started.”

The Tink founders is confident that the Visa deal would help them achieve even more.

“Teaming up with Visa means we’ll now be able to move faster and reach further than ever before, and we know that Visa is the perfect partner for the next stage of our journey,” Kjellén and Hedberg said.

Tink has also faced challenges. For instance, Svenska Dagbladet reported in September that Tink accidentally compromised sensitive customer data. The fault seem to have been a bug that enabled some users to see other users’ data. Tink said at the time that the fault had occurred at a partner bank. Handelsbanken was later named as the bank that had caused the incident and publicly admitted to having caused the glitch.

The incident had been reported to Datainspektionen, the Swedish Authority for Privacy Protection, which didn’t issue any sanctions against the bank for it.

Klarna suffered a similar problem in May, although, the BNPL quadradecacorn’s issues seem to have been caused by an internal mishap and not because of a partner company.

Tink will retain its management team as part of the Visa deal.