Mergers and acquisitions involving companies in the payments industry have continued at a fast pace in 2020, with an increasing focus on payments solutions beyond traditional credit cards and deposit accounts. The COVID-19 pandemic has served as an accelerator for digital payments solutions, with a push toward contactless payments and digital solutions for those sheltering at home. The pandemic has also exposed fintech companies with less durable revenue models and may increase the sale of fintech businesses to incumbent bank acquirers. Many large banks are reacting to the pandemic by prioritizing mobile channels and accelerating their drive to digital transformation, and in many cases that decision may lead to acquisitions where the ability to build digital businesses internally is viewed by incumbents as too slow and cumbersome.1 The payments space in particular has been viewed as a bright spot for fintech, with embedded payment solutions (where payment innovations are embedded in the end user experience of a non-financial business) gaining traction. Technology companies, such as Facebook, Apple, Amazon and Google, are also investing in payments solutions. The growing importance of online payments processors, such as PayPal and Stripe, and embedded payments companies, such as Shopify, Instacart and Klarna, exemplify these trends.

Accelerating Trend of Payments Companies M&A

Several large capital raising rounds demonstrate the strength of payments companies despite, and partially because of, the COVID-19 environment. Trends driving this growth include the changing needs of consumers, including the desire for cashless payments, digital onboarding, paperless identity verification and modernized payments infrastructure. In April 2020, payments processor Stripe raised $600 million in a Series G preferred stock capital raise with an enterprise value estimated at $36 billion. The progress in 2020 of Marqeta the digital card issuing platform, is indicative. In May 2020, it raised $150 million with an enterprise value estimated at $4.3 billion. In July 2020, Marqeta partnered with JP Morgan Chase to launch digital-only credit cards and, in October 2020, Marqeta and Mastercard announced a global partnership. Throughout the summer of 2020 rumors of a Marqeta IPO were reported.2

Perhaps the best indication of the importance of digital payment solutions can be seen in the three large deals announced in 2020 by three of the largest credit card networks, American Express, Visa and Mastercard.

Visa/Plaid: In January 2020, Visa announced that it would acquire data aggregator Plaid, with a closing still pending as of the date of this article. The consideration for the transaction totals $5.3 billion, consisting of approximately $4.9 billion of cash and $400 million of retention equity and deferred equity consideration. This acquisition will allow Visa to continue expanding from its core credit and debit network business into an emerging fintech ecosystem. Prior to the acquisition, Plaid successfully worked to allow consumers to connect their bank accounts with numerous successful fintech businesses (e.g., the popular "Venmo" application). According to Visa, the acquisition of Plaid presents an opportunity for Visa to use its reputation and recognition in the marketplace to grow Plaid's payment capabilities and further develop Visa's relationships with fintech companies in the future.3 The Plaid transaction was regarded as one of the most successful fintech exits to date.4

Mastercard/Finicity: In June 2020, Mastercard agreed to buy a financial data aggregator, Finicity, for $825 million plus up to $160 million in earn-out payments if certain performance targets are met. According to Mastercard, Finicity will bolster Mastercard's open banking services in North America and provide one-stop shopping for their customers' data, payment and open banking needs.5 Finicity's online platform will give customers the ability to allow their banking partners to make scheduled payments on their behalf and provide advice on money management. As with the Visa/Plaid deal, this deal highlights the importance of payments infrastructure for large financial institutions embracing fintech solutions.

American Express/Kabbage: In August 2020, American Express announced that it had agreed to acquire substantially all of the assets of the fintech lender, Kabbage. According to American Express, Kabbage's technology, products and people will allow American Express to offer a broader set of cash flow management tools and working capital products to its small business customers in the United States.6 Kabbage's lending portal unifies online bill payment, credit lines and cash flow management tools as well as a business checking account. American Express did not purchase Kabbage's pre-existing portfolio of marketplace loans. American Express will benefit from the well-regarded fintech lending technology held by Kabbage as well as its technology talent in a market where human resources are regarded as scarce. Kabbage's lending platform gathers data about small business customers, including bank account data, payment processing data, shipping data, credit card transaction data and accounting information.

Special Consideration for Payments Companies M&A Transactions

Payments company M&A transactions present a number of issues unique to this fintech asset class. Special attention should be paid to the following considerations: (1) the complex and often competing regulatory framework for payments companies, including state and federal banking regulations as well as state money transmission laws; (2) valuation issues and the desirability of earn-out structures; (3) conditions to closing and consents needed in the payments space; and (4) technology and key contract diligence issues.

Regulatory Overlay for Transactions Involving Payments Company

Payments companies are subject to a complex regulatory framework, at both the state and federal level. These regulations are in addition to a financial institution's compliance obligations under banking laws related to M&A transactions. When considering a payments company transaction, the buyer should diligence the seller's compliance with its regulatory obligations sooner rather than later in the transaction lifecycle.


1 See "A burning platform: Revamping bank operating models for payments," 2020 McKinsey Global Payments Report (Oct. 2020),

2 See "Modern Card Issuing Leader Marqeta Valued at $4.3B in Latest Round," Businesswire (May 28, 2020),; "Exclusive: Goldman Sachs-backed payments startup Marqeta prepares for IPO," Reuters Industry, Materials & Utilities (July 9, 2020),; "J.P. Morgan Teams with Marqeta on Virtual Cards for Commercial Clients," Payment Methods (July 28, 2020),; "Mastercard Invests in Another Fintech, Marqeta," Barron's Financials (October 8, 2020),

3 See "Visa to Acquire Plaid," Visa Press Release (January 13, 2020),

4 See "Visa Acquires Plaid: A Review Of The Financial Data & Infrastructure Market," CB Insights Research Briefs, (January 15, 2020),

5 See "Mastercard to Acquire Finicity to Advance Open Banking Strategy," Mastercard Investor News Details, June 23, 2020,

6 See "American Express to Acquire Kabbage," American Express Press Release (August 17, 2020),

7 We use the term "state" to refer to states and the District of Columbia collectively. Montana is the only state that does not currently have a money transmission statute.

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