Visa (V) Acquires Tink, Boosts Digital Financial Services

Visa Inc. V recently completed the buyout of Europe’s open banking platform, Tink, almost less than a year after announcing the deal. The acquired company will function as a standalone subsidiary of V in the near term.

The acquisition seems to be a win-win situation for both companies. The completion of the transaction makes it easier for V to establish its presence in the growing open banking space. Since the concept of open banking revolves around creating a secured data sharing ecosystem where the third-party payment providers and other financial service providers are allowed to access the personal and financial data following permission from banks’ customers, Visa can capitalize on the prevailing scenario.

Visa possesses the much-required infrastructure as well as cybersecurity and fraud prevention capabilities to develop a secured platform and ramp up the adoption of open banking globally. The Tink buyout further strengthens V’s capability to roll out innovative yet secured digital financial services to clients worldwide.

V chose to work together with Tink since it has a well-established record of utilizing a single API to bring about seamless money movement processes, access to aggregated financial data and usage of smart financial services (including risk insights and account verification) by customers. The acquired company will also benefit from the latest deal. The solid consumer trust and brand recognition earned by Visa over the years will pave the way for Tink to connect with over 15,000 financial institutions. Prior to the latest deal, it was integrated with more than 3,400 banks and financial institutions.

Meanwhile, the clients with access to the high-quality digital financial services will be able to aid consumers in better management of money and financial data. Irrespective of size, businesses can take advantage of a wide variety of secured digital tools and integrate digitization within their operations. This will aid businesses in keeping pace with an increasingly digital world.

Initiatives similar to the latest one seem to be time opportune as well. With digital transformation efforts shaping every sphere of life, there is robust consumer demand for convenient and affordable digital financial services. A rapidly growing digital economy has led to the transformation of business models and the integration of automation across the business payment ecosystem.

Visa has been eyeing the open banking space, owing to the numerous benefits it offers the customers. Open banking enables accelerated and secured transactions from any corner of the world. A varied set of choices, enhanced services and seamless outcomes are some of the benefits of open banking. The latest development might generate revenue streams and bolster the customer base of Visa, which bode well. Per the leading market and consumer data provider Statista, the number of open banking users across the globe is projected to witness an average annual growth rate of around 50% over the 2020-2024 period. The same source anticipates the growth rate to be the highest in the European market, which makes Visa’s move of acquiring the Europe-based Tink a perfect step.

Shares of Visa have lost 8.7% year to date compared with the industry’s decline of 9.9%. V currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Image Source: Zacks Investment Research

Prior to the latest buyout, other companies that made concerted efforts in the past to make a mark in the open banking space by partnering with Tink include American Express Company AXP and PayPal Holdings, Inc. PYPL.

By partnering with Tink, American Express integrated Tink’s open banking services into its application and risk analysis process. Meanwhile, PayPal continued to make significant investments in Tink for the development of open banking technology.

Mastercard Incorporated MA has always promoted widespread adoption of open banking. It has Open Banking Connect in place for strengthening its position in the space. In 2021, MA completed the acquisition of Aiia, a leading European open banking technology provider. Mastercard gained another boost in the open banking space with the acquisition of Finicity in 2020, which connects users' bank accounts with other payment apps.

American Express stock has gained 3.7% year to date. Meanwhile, shares of PayPal and Mastercard have lost 47.8% and 9.7%, respectively, in the same time frame.

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