Future worries causes Visa to pump billions into Tink

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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on June 24th, 2021.

The Swedish company Tink has 18 billion reasons to thank the US Department of Justice. Their stopping of Visa’s intended deal with the similar company Plaid laid the foundation for today’s giant acquisition.

Al Kelly, CEO of the card company Visa, seems to know what he wants.

In 1.5 years, he has tried to make two billion dollar deals of a very similar kind.

The segment that Visa is interested in is called “open banking” – a new standard for being able to share financial information between banks and companies. The first deal, with the fintech company Plaid, was blocked by the US Department of Justice, which accused Visa of breaching anti-trust.

After a 364-day wait, the acquisition was canceled and the deal worth 5.3 billion dollars was canceled.

Then Kelly got another chance to do the same thing again – but on the other side of the Atlantic. The card company Visa wants to buy Swedish Tink for 1.8 billion euros, about 18 billion SEK.

Both acquisitions point to the major change that is currently taking place in the banking world. The idea of ​​the legislator, the European Parliament in this case, is that consumers should be able to move money, accounts and financial services between different providers in a simple way.

But what is easy for the consumer is not always easy for the bank that has to deliver it.

This is where Tink comes into the picture.

Simply put, Tink has built a technology that makes it easier for banks, systems, and apps to talk to each other. In Sweden, Tink has long had collaborations with, among others, Nordea, Avanza, and SEB.

The great interest from Visa indicates one more thing: a concern about the future of payment cards.

For a long time, Visa, Mastercard and American Express have in practice functioned as the global infrastructure for moving money between people and companies.

But then there are upstarts like Trustly who offer several different options for moving money, where debit cards are just one of them and rarely neither the fastest nor the cheapest. And already today there are Swedish stores and e-retailers that, for example, only accept the Swedish payment system Swish as a form of payment.

Anyone who has ever tried to transfer money between different countries knows that it is anything but smooth, with long IBAN numbers and SWIFT codes.

Open banking makes it possible – in theory at least – to circumvent both debit cards and other hassle. Bad news for someone who is the CEO of a card company, if you do not have a real pile of billions to invest.

Al Kelly at Visa has just that.

Now he wants to be part of that movement.

The deal with Tink was therefore fairly expected. When the analysis company Forrester listed the leading companies in open banking, Plaid came in first place, and Tink in second.

Tink also has an advantage in that they operate in 18 European markets. Thus, the US Department of Justice does not have much to say about this deal.

However, their European counterparts could have similar objections. The acquisition will now undergo the usual review by the European Commission before the deal closes completely.

Even if Visa should have legal problems this time too, Tink is expected to emerge as the winner. After the deal with Visa went awry for Plaid, it took only three months before they received a new investment – at an almost three times higher valuation than what Visa had paid.

This column was first published in SvD Näringsliv, in Swedish, on June 24th, 2021.

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