Visa is purchasing the financial technology company Plaid for $5.3 billion, a major push by the payment processing giant into other types of money transfer systems outside of Visa’s traditional credit and debit card business.

Plaid allows consumers to link their bank accounts to financial services apps like Venmo, PayPal, Betterment and Transferwise. The company is an important but unknown middle man between the banks, who hold consumers’s cash, and the dozens of platforms who vie to be the platform of choice to send that cash. Bankers refer to companies like Plaid as “the plumbing” behind how these apps work.

This “plumbing” has become more important has more Americans use mobile wallets or send money to friends, families and businesses. Visa estimates that 1 in every 4 Americans who have a bank account have used the underlying technologies of Plaid to link their bank accounts with other money transfer apps.

The Monday announcement is Visa’s first big push into a product that isn’t just credit and debits cards. Visa is the world’s largest payment processing company, but it makes almost entirely all of its money from swipe fees it earns from merchants whenever its cards are accepted.

Visa expects the acquisition, which will close in three to six months pending regulatory approval, to increase the company’s revenue and profits starting next fiscal year.

The San Francisco company was already an investor in Plaid, and so is Visa’s biggest competitor, Mastercard. Both companies invested in Plaid in 2019. In a conference call with investors, Visa’s Chief Executive Executive Al Kerry said the seven-month-old investment gave Visa more than enough information to decide to buy the company outright.

(AP)