The financial services giant said it was nixing the deal to avoid "protracted and complex litigation" with regulators.
There are no two ways about it, the deal falling through is a blow for Visa.
Visa Inc. today abandoned its $5.7 billion acquisition of financial technology startup Plaid Financial Inc. following a lawsuit from the U.S. Department of Justice challenging the deal on antitrust grounds.
"We believe the combination of Visa with Plaid would have delivered significant benefits", Visa chief Al Kelly said in a statement. Startups like Robinhood, Coinbase and Gemini depend on Plaid's API to allow users to connect their bank accounts to their apps.
Visa said that it still believes the deal between the two San Francisco companies would have benefited consumers, financial institutions and developers but that it chose to scrap it to avoid an extended court battle.
As such Visa will continue to work with Plaid as an "investor and partner", Perret confirmed, "so we can fully focus on building the infrastructure to support fintech". The start-up has raised more than $300m from investors including Goldman Sachs, Andreessen Horowitz and Google's GV.
Zach Perret, Plaid CEO and founder, issued a statement on the decision to remain an independent company. Hundreds of new banks joined our platform, and over 4,000 companies turned to Plaid as the infrastructure to support their businesses, including numerous largest Fortune 500 companies who are focused on bringing digital financial products to their customers.
"American consumers and business owners rely on the internet to buy and sell goods and services, and Visa - which has vast power in online debit in the United States - has extracted billions of dollars from those transactions", the Justice Department said in a statement.
The legal challenge raises the prospect of increased regulatory scrutiny of fintech deals in the future.
The DOJ filed a civil antitrust lawsuit in November to block Visa's acquisition of Plaid.
"In a victory for American consumers and small businesses, Visa has abandoned its efforts to acquire an innovative and nascent competitor", said Assistant Attorney General Makan Delrahim of the Justice Department's Antitrust Division in the press release.
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