Visa‘s $5.3 billion acquisition of data aggregator Plaid puts the company’s tool set at the center of financial services innovation.

The move embeds Visa deeper into the payments infrastructure, allowing it to expand its footprint and diversify its product and service offerings.

“Fintechs are increasingly developing on bundling and repackaging financial services payment and funds, movement capabilities, all with end-users in mind, and these fintech offerings are being used more and more,” said Visa CEO Al Kelly in a call with investors Monday. Plaid will allow Visa to extend the reach of its payment solutions and value-added services, he added.

Zilvinas Bareisis, senior analyst at Celent, said the acquisition was a strategic move for both companies and that Visa will be able to play a more active role in shaping open banking through Plaid. 

“Rather than investing into interbank real-time payments clearing and settlement infrastructure (non-card rails), Visa is focusing on services on top of rails,” he explained, in a statement. “Helping a growing roster of fintech companies connect to traditional bank and card accounts is an important component of that strategy. Visa’s global presence will also help Plaid accelerate growth into other markets.”

With Plaid comes new revenue opportunities through access to Plaid’s client network, including support for issuer banks that intend to work with fintechs. 

“Plaid’s APIs give Visa a new pathway to data-driven revenue streams,” Richard Crone, a payments consultant, told PaymentsSource. “The popularity of embedded banking is seen in Google Cash, Libra and other forms of ‘headless banking’ where banking companies are underneath someone else’s brand or letterhead.”

See also: Plaid expands to France, Ireland and Spain

According to a presentation to investors, Plaid is connected to 2,600 fintechs and more than 11,000 financial institutions. With that network, Plaid services more than 200 million user accounts. One in four consumers with a U.S. bank account have used Plaid, according to both companies.

Meanwhile, Plaid positions Visa nicely to accommodate European banks seeking to comply with data protection regulations such as GDPR and PSD2. 

“The impacts of GDPR and PSD2 continue to be a source of concern for some investors,” a Morgan Stanley research note on the acquisition observed. “Visa and Mastercard are in a strong position to offer open banking solutions to banks and fintechs to mitigate some of these potential headwinds, and Plaid should be a nice addition to Visa’s product suite.”

The acquisition has also raised questions about the future of other aggregators. Raymond James, for example, published research examining whether wealth management tech firm Envestnet should sell data aggregator, Yodlee, which it acquired in 2015.

“It’s possible that Envestnet could shift from being the owner of Yodlee to a client of Yodlee with minimal disruption to Envestnet’s core financial advisor-client base,” the report said. “Assuming this to be the case, Envestnet’s board of directors may potentially look at the rich valuation Visa is paying for Plaid and conclude that a sale of Yodlee is in Envestnet’s shareholders’ best interest.”

Despite the promise of owning a deeper relationship with banks and fintechs alike, as well as the international expansion benefits to both companies, Visa cautioned against prejudging the results of the acquisition in the short term. According to the company, acquiring the data aggregator is a long-term move to align Visa’s business plan with the growing ecosystem of fintechs that require secure connections to account data.

“This is not a one- or two-year revenue growth opportunity,” said Vasant Prabhu, chief financial officer at Visa, during the call with investors. “This is a decade-long opportunity that, in our view, transforms both their business and ours.”

This story has been updated to attribute Celent’s commentary to Zilvinas Bareisis.

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