Visa announced today that they would be acquiring Swedish open banking fintech Tink for more than $2 billion. The news comes a few months after Visa abandoned plans to acquire Plaid for $5.3 billion due to regulatory hurdles in the United States. Tink and Plaid both operate in the open banking space, which refers to financial technology companies that develop third-party services to interface with a variety of banking functions using customer data provided by financial institutions. The deal continues a trend of consolidation across the payments industry over the past several years.
Visa Looking to Diversify
Through their open banking platform, Tink reaches over 250 million bank customers across 3,400 banks in Europe. Client financial institutions include PayPal, BNP Paribas, American Express and Lydia. Since being founded over 10 years ago, Tink's single API has been built to allow customers of financial institutions to view financial data, initiate payments, enrich transactions, verify account ownership and build personal finance management tools. With the consent of financial institutions, open banking companies like Tink are provided with access to customer information in order to integrate their suite of services with financial institutions. This integration makes financial decision-making easier for customers, allowing all information to be readily available in one single window. With Visa's brand recognition and global reach, the acquisition of Tink is a signal that Visa is continuing to innovate and look at new ways of diversifying their operations in the financial sector. Al Kelly, CEO and Chairman of Visa, said that “by bringing together Visa’s network of networks and Tink’s open banking capabilities we will deliver increased value to European consumers and businesses with tools to make their financial lives more simple, reliable and secure.” The deal is still subject to regulatory approvals, and Visa has stated that the transaction will be financed solely with cash. Despite the announcement, regulatory hurdles similar to the ones faced on the Plaid acquisition are not out of the question.
European Regulatory Environment
Tink is just one of several fintech industry giants to come out of Sweden. Klarna, a buy now pay later fintech was valued at $46 billion in its most recent funding round earlier this month, while payment company iZettle was acquired by PayPal for $2.2 billion a few years ago. One of the reasons for the success of Swedish and other European fintech companies may be the favourable regulatory environment. In a decision that was highly beneficial to open banking, the European Union's Payment Service Providers Directive (PSD2) began being implemented in 2018. In the works since 2007, PSD2 stipulated that banks would be required to allow access to customer data to third-party payment service providers such as Tink. While privacy issues were a point of contention, the European Union ruled that data should be shared in order to increase innovation and competitiveness in the sector. In total, over 440 companies are currently operating in the open banking sector in Europe and are using this data sharing to provide customers with a wide range of financial services.