Keith Grose, head of Europe at Plaid, sat down to discuss the fallout from the great ‘would-have-been’ blockbuster acquisition of the fintech by Visa.

When announced at the beginning of last year, Visa’s planned acquisition of Plaid for $5.3 billion was one of the largest in fintech during 2020. But when the Department of Justice filed a lawsuit on antitrust grounds challenging the purchase in November, the sheen of the proposed deal quickly lost its lustre.

While Visa denied that the deal would violate Section 2 of the Sherman Act, coming face to face with “protracted and complex litigation” soured the proposal and saw the players terminate the transaction.

Asked whether the office (or zoom calls) had seen a fleet of downcast staff, Grose spruiks only optimism for the fintech: “Plaid is excited for the future. It has been a crazy year with Covid-19 and there has been a huge acceleration in fintech, the needs of people and consumers changed a lot when everyone was forced to work from home – our customer base grew 60%.”

Grose has insisted that Covid accelerated trends that were already happening across payments, but when asked if Plaid would join the great SPAC trend given the deal’s collapse he keeps mum – “That’s more Zach’s (Perret, Plaid CEO) decision than mine.”

Staying the course in the UK and Europe

2020 saw the fintech launch payment initiation services and QR code authentication, and is calibrating its efforts toward open banking capabilities in 2021. This includes building out new functionalities for payment initiation, building in more features and services for bank-to-bank payments, and expanding its UK and European customer base.

Grose adds that while Plaid is now extending out to entreprise clients - the “Microsoft, PayPal and Googles of the world,” it keeps the same attitude of working together with their developers.

“We are still by developers, for developers. What has changed with our expansion to Europe is the growth of our brand awareness.”

London was Plaid’s home market for its European expansion which kicked off just over two years ago. The fintech has since expanded to Ireland, France, Spain and the Netherlands and without offering any specifics, Grose promises “lots of new launches in the works in new European countries” throughout 2021. 

He furthers that while London has a great fintech scene, the same can be said about almost every European market they have entered. Though there are distinctions between its US birthplace and the European markets the most polarising differences emerge on a prospect by prospect or customer by customer basis.

One aspect which presents a more obvious difference, Grose argues, is that there is a lot more focus around brand and marketing a company image in London and Europe, whereas it’s more common to meet early stage startups that are just technical founders in the Bay Area and Silicon Valley.

“That said, I think you see examples of both of those in both markets. We’ve learned to play well with any type of technical competency in terms of developers.”

Why consolidate with open banking on the cards?

Grose believes that it’s still early days for open banking payments. Depending on where exactly a given fintech resides in the industry, there is huge potential for building functionality around consumer protections and refunds in the e-commerce world and this is where partnering with big payments providers is attractive.

“That said, there is plenty of exciting development, both in terms of the regulation and, government mandated features, as well as features that the market are going to bring to bear.”

“Exactly how this will play out for merchants in e-commerce over the next five to ten years remains TBD. There is certainly a place for open banking payments in this world, but developing features and building that network takes time.”

Having finally issued the Digital Markets Act to complement the Digital Services Act, it’s clear that the European Commission is making good on its promises to boost competition across the digital markets it governs. It remains to be seen how exactly implementation of these will impact the spectrum of the industry - from startups hopeful for a juicy exit to larger players desperate to cling to their edge.

Disintermediation: Does selling out make you a sell out?

Presented with the potential contradiction apparent in a fintech disrupter being purchased by the incumbent, Grose sees the result of fintech disintermediation in a different light.

“One of the things that this immediately makes me think of is embedded finance, which to me serves as the best of both worlds.”

He sees the convenience of bringing financial services to meet people where they already are, and working towards a goal of removing peoples’ financial health as their primary or secondary “stressor”.

“Outside of physical health, financial health is the secondary concern. Providing better experiences that are all included in the super apps of the world, helps to empower this. It’s also about providing niche financial services experiences where people already are today, such as catering to gig economy workers. I think we’re going to see more and more of these experiences over time.”

Motivated to improve its user experience, just last week BNP Paribas announced it would extend its European partnership with key Plaid competitor, Tink, to add a new multi-banking feature to BNL’s mobile banking app. Already working in partnership with UK incumbents such as Barclays and Lloyds, Grose responds that competitors like Tink or Truelayer aren’t a thorn in their side.

“What we’re trying to do is provide a pan-European, transatlantic offering to help companies scale quickly into these new markets. Helping those developers grow from a four-person company to a multi-continent company with the same integration, that’s where we really fit in.”

Graphic source: @ericstromberg

What will Plaid make of the crypto hysteria?

Raising the news of digital asset custody service provider Anchorage’s approval for a federal banking license from the Office of the Comptroller of the Currency (OCC), Grose is optimistic about the opening up of cryptocurrency.

“We’re starting to see the bridge between that industry and the traditional regulatory space, and I think the US has made a big change in wanting to promote regulation here - with Brian Brooks [acting head of the OCC] for instance.”

While it remains to be seen just how much of this interest is carried forward with the new administration in the US (Yellen being historically negative on cryptocurrency), Grose explains that Europe takes much more of a market-by-market view, with some Eastern European markets being very crypto friendly while others remain more wary.

“While we don’t work on the blockchain today, I think there is great potential for Plaid to work with crypto companies. A lot of features we provide can help to verify users and easily transfer money from fiat into an E-wallet which can then be converted into crypto.”

Plaid is specifically focused on trying to help crypto companies do this, and he adds that open banking payments currently provide the best settlement, lowest cost option. “I think you'll start to see the work that we do in crypto apps increase over time.”

Does decentralised finance have a limit?

Personally passionate about decentralised finance (DeFi), Grose sees DeFi as truly trying to recreate some of the most complex parts of financial infrastructure in a way that's accessible to retail investors – naturally, this comes with risks.

“You have to figure out the right way to educate users, and I think it's at a state right now where it's still the early adopter stage and not yet mainstream. To cross that chasm in a way that's safe and good for users is going to take lots of user education and probably some regulation.”

Grose hopes to see follow on implications for traditional financial infrastructure as DeFi evolves, “as we begin seeing where this type of new technology can be applied to make a positive difference in the future, as well as improving today’s processes.”

Despite any revolutionary hopes he holds around DeFi, Grose doesn’t see monolithic payment service providers and networks, like SWIFT, leaving any time soon.

“There will be a place for SWIFT for a long time just because of the amount of money that is transferred bank to bank at an institutional level…I do think that competition in the payment infrastructure space is going to force a lot of changes and will ultimately benefit consumers.”

He emphasises that Plaid is focused on and excited about continuing to grow and support the fintech ecosystem. “It’s less about getting to a destination and more about continuing the growth rate. If we continue to execute like that there are a lot of great opportunities ahead, and, hopefully great exits ahead as well.”

Holding out hope for a great exit perhaps explains the all-around optimism about Plaid’s place in the European landscape, and Grose is certain that Europe holds fertile ground for further expansion.

“There is therefore so much opportunity for us to chase, particularly in Europe with open banking payments, and so everyone at Plaid is all-hands-on-deck to get back aboard and keep sailing.”