Visa’s $5.3 billion acquisition of Plaid hits problems

The Department of Justice filed suit Thursday to block Visa Inc.’s planned $5.3 billion acquisition of Plaid Inc., a move that could signal a tougher road ahead for the payments giant as it tries to expand into new-school avenues of fintech.

In its complaint, the Justice Department alleges that Visa V, +0.42% is a “monopolist” in online debit and is seeking to eliminate the “nascent competitive threat” brought on by Plaid, which allows consumers to connect their bank accounts to hot fintech platforms like investment platform Acorns and PayPal Holdings Inc.’s Venmo. The suit filed in U.S. federal court for California’s Northern District alleges that Plaid has a valuable network of connections to banks and consumer accounts that “position Plaid to overcome the entry barriers that others face in attempting to provide online debit services.” Visa asserted in a statement that the Justice Department’s “attempt to block Visa’s acquisition of Plaid is legally flawed and contradicted by the facts.” The company said that it doesn’t face competition from Plaid, whose capabilities “complement Visa’s.” “Visa is confident that this transaction is good for consumers and good for competition,” the company continued. Barclays analyst Ramsey El-Assal wrote that the Justice Department suit is a bit surprising given that the U.K.’s Competition and Markets Authority recently offered approval for the deal and suggested that Visa’s move into open banking—the idea of enabling greater access to bank and other financial data—might be a tougher road than originally expected.