Visa drops bid to buy Plaid; Brown outlines Senate banking committee agenda

Receiving Wide Coverage ...

It’s off

Visa “is abandoning its $5.3 billion planned acquisition of Plaid, a key player in the financial-technology space, in the face of a Justice Department antitrust lawsuit that challenged the deal,” the Wall Street Journal reported. “The department sued to block the deal in November alleging the acquisition would allow Visa to unlawfully maintain a monopoly in the online debit-card market. Plaid, the government argued, was a nascent but important competitive threat to Visa, and eliminating that threat would lead to higher prices, less innovation and higher entry barriers for online debit services.”

Al Kelly, Visa’s chairman and CEO, said “the companies would eventually have won a legal battle,” but “it has been a full year since we first announced our intent to acquire Plaid, and protracted and complex litigation will likely take substantial time to fully resolve.”

“Makan Delrahim, the Justice Department’s top antitrust official, said the deal’s demise was good for consumers.” “With more competition, consumers can expect lower prices and better services,” he said.

“The decision is a blow to Visa’s effort to add fast-growing fintech services to its payments business,” the Financial Times said. “Plaid provides software that connects fintech companies such as payments group Venmo and financial planning company Mint with their customers’ bank accounts.”

The DOJ’s “concern about wiping out competition stemmed from Plaid's ability to develop payment apps and collect and decipher data, two things Visa also wants to emphasize,” American Banker said.

Wall Street Journal

Synchronized moves

Synchrony Financial president Brian Doubles will add the CEO title on April 1. At the same time, the current CEO, Margaret Keane, will become executive chairman.

Doubles became president in 2019 after serving as CFO. “Ms. Keane is one of the few female CEOs in banking. She helped take the company public in 2014, after its separation from General Electric Co. Before the IPO, Ms. Keane and Mr. Doubles worked as CEO and CFO, respectively, of GE’s retail card division, which was spun off to create Synchrony.”

“The challenge for Doubles will be expanding Synchrony’s share of consumer credit spending in an increasingly tight and competitive market, where consumers have been drawn to credit card alternatives such as installment loans as a way to limit their debt,” American Banker said.

Financial Times

Rules of the road

“Self-driving cars arrived sooner than anyone anticipated, and before safety regulators could adapt. Banking is headed down the same road. And it’s being driven by the technology behind decentralized finance, or DeFi,” acting Comptroller of the Currency Brian Brooks writes in an FT op-ed.

“However, self-driving banks present the same challenges and opportunities as autonomous vehicles. On the opportunity side, they can allow savers to stop shopping around for the best interest rates by having algorithms do this for them. They can also end discrimination against certain borrowers by having software make credit decisions. They could even eliminate the risk of fraud or corruption by no longer being run by humans at all.”

“Self-driving banks also present new risks, though. There is a risk that, in the absence of federal regulatory clarity, U.S. states rush to fill the void and create a patchwork of inconsistent rules that impede the orderly development of a national market. This is exactly what happened with self-driving cars. Federal regulators must therefore determine what a regulatory scheme for self-driving banks should look like.”

Brooks is expected to step down from the post “within days, paving the way for President-elect Joe Biden to nominate a successor after his inauguration,” American Banker reported.

Under the spotlight

Former Commerzbank CEO Martin Zielke and Deutsche Bank CEO Christian Sewing are scheduled to testify Thursday before a parliamentary committee investigating the failure of Wirecard, the defunct German payments company. The committee is expected to “turn the spotlight on the backing the once high-flying company received from some of the country’s largest banks.”

“One of a consortium of lenders to Wirecard, Commerzbank lost €175 million when the company failed in June in one of Europe’s largest accounting frauds.”

New York Times

New sheriff in town

Incoming Senate Banking Committee chairman Sherrod Brown of Ohio “proposed a sweeping agenda on Tuesday, saying he would seek to improve housing and banking services for low-income Americans, fight global warming and foster racial equality when Democrats control both chambers of Congress and the White House. The committee, which oversees housing and transportation matters as well as banks and financial regulators, has been too deferential to the financial services industry,” Brown said.

“Wall Street doesn’t get to run this entire economy,” he said, adding that “he wanted to investigate the relationship among stock prices, executive compensation and workers’ wages, taking on a corporate business model that ‘treats workers as expendable.’”

“Brown said housing issues received short shrift when the GOP ran the Senate Banking Committee, but that will change under his leadership,” American Banker reports.

Quotable

“This committee has flat-out pretended that climate change doesn’t exist. Housing was a word left out of this committee for too long, and it won’t be left out anymore.” — Incoming Senate Banking Committee chairman Sherrod Brown, announcing his agenda.