Why Regulators Are Saying ‘Yes’ to Mastercard-Finicity But ‘No’ to Visa-Plaid

Visa Inc. may be stymied for the time being in its quest to enter the increasingly crucial data-networking business, but its archrival Mastercard Inc. now expects to become a key player in that arena by the end of the year. That’s when the number-two card network says it will close on its $825-million acquisition of Finicity Corp. now that the federal government has given the deal the go-ahead.

Mastercard, which announced the deal in June, received official word Monday that the U.S. Department of Justice and the Federal Trade Commission had granted so-called “early termination” to their review of the transaction, effectively flashing a green light for it to go ahead. The move stands in stark contrast to the DoJ’s position on Visa’s much richer $5.3-billion proposal to buy data aggregator Plaid Inc. The department earlier this month sued to stop that combination on antitrust grounds.

Salt Lake City-based Finicity will bring key assets Mastercard expects to deploy in what it calls its “multirail” strategy to expand into automated clearing house transactions and real-time transfers. Like Plaid, Finicity is a specialist in the growing field of data networking, which involves using application programming interfaces to link financial-services providers to consumer and business bank accounts to verify funds availability and facilitate money movement. Finicity has forged some 16,000 such links, compared to 11,000 for Plaid, according to industry data compiled by rival aggregator MX Technologies Inc. 

The DoJ based its lawsuit on its contention that Visa’s intention in buying Plaid is to stop it from building a data network that could ultimately compete with the number-one card system’s debit-networking business. Visa denies the claim and argues the antitrust suit is baseless. 

But with Mastercard’s deal for Finicity, while the government apparently saw no such threat, any legal action would have represented an exercise in twisted logic, argue some observers. They point out that if the DoJ’s theory is that Visa is a monopolist in debit services, then the department could not logically make the same claim against Mastercard. “If Visa’s a debit-network monopolist, then Mastercard isn’t,” notes Eric Grover, principal at Minden, Nev.-based consultancy Intrepid Ventures. “Objecting to Mastercard’s Finicity [deal] on antitrust grounds would therefore be a difficult case to make, and, also, muddy the DoJ’s case against Visa.”