Visa Needs This Deal, But Approval Won’t Be Easy
Visa’s bid for Tink aims to break in to the European direct-payment market, which is expected to grow exponentially in the coming years. Transactions that run outside the card networks account for $139 trillion worldwide and EU regulators are promoting new initiatives in this area such as account-to-account payments (A2A) and QR codes that could cut 80% of fees vs credit cards in benefit of consumers.
Visa already tried to enter in direct payments by trying to snap up Plaid in 2020 but U.S. antitrust regulators opposed the transaction and the companies eventually abandoned the deal. Visa’s biggest risk to closing the Tink deal is the EU’s strategic focus on encouraging EU-based companies to create a pan-European cross-border payment solution to bypass reliance on U.S. card network.
Antitrust Reviews Shouldn’t Be A Problem, but Politics Are
This transaction shouldn’t raise significant antitrust concerns given minimal overlap of Visa and Tink’s businesses in Europe and favorable U.K. precedents from the Visa-Plaid deal. Tink focuses on connecting banks and merchants with bespoke APIs that allow consumers to pay merchants directly from their banks accounts, without using credit cards. The market for A2A payments is still very fragmented and it is difficult for a single company to dominate the market, but scale is of utmost importance. Additionally, strong rivals in the A2A market such as Plaid, Bud and Mastercard could offset Visa’s potential market power, which should favor the company to obtain the antitrust approvals. Yet, as we mentioned before here, the EU is trying to reduce its reliance on U.S. card networks, thus Visa and Tink may face opposition and approval isn’t guaranteed.
Rivals Are Moving Fast
The Mastercard-Nets and Nexi-SIA-Nets deals show the speed of consolidation in this market and Visa seems to be lagging behind. Mastercard’s acquisitions of Vocalink in the U.K. and Nets in the Nordic countries gave the card company access to the European market at a time when A2A payments were still in a very initial stage. Two of the strongest European rivals, Nexi and Worldline, made also several acquisitions to expand its footprint in Europe.
Long Antitrust Reviews Are Possible
This deal will likely be reviewed by EU and U.K. regulators but we believe in-depth reviews may be needed before taking any decisions. Regardless of Tink’s revenue in the EU and the U.K., both regulators have enough tools to attribute jurisdiction to themselves to review the deal. In Visa-Plaid, the U.K. regulators approved the deal after a phase I merger review, but in this case, and specially after the U.S. Department of Justice challenged the deal, regulators may need additional time to scrutinize the deal. If a phase II merger review is needed, approvals may come in 1Q22.
