Federal Watchdogs Investigate Bad Actors Taking Advantage of COVID

Thursday, August 5th, 2021

COVID opened new doors for all industries, payments included. As the world struggled to survive, payment enablers unleashed everything they had in store.

Even relatively new avenues like “Buy now pick up later” flourished. But in the wake of all the chaos, regulators are keen enough to smell some fishiness among payment giants.

Early this year, investigators from 3 Federal agencies began scrutinizing American Express’s business card sales.

But perhaps this call was part of a steady ongoing investigation by federal watchdogs targeting bad players in the payment sector— a move that may catch fire for the rest of 2021.

So are regulators cracking down on unlawful actors as the pandemic persists?

Perhaps the most shocking attack is that of the Department of Justice against Visa’s move to take over Plaid, a renowned account service.

According to the Justice Department, the takeover would compromise competition in payments with banking accounts instead of cards.

It seems like it’s all trouble for Visa as investment experts criticize its $5.3 billion takeover bid, which exceeded Plaid’s previous bid of $2.7 billion twofold, especially because the proposal lasted long before an agreement.

Why is Visa going all in for a firm that was just an account aggregator? Why so, while colossal banks that issue Visa cards like PNC and TD complained about how Plaid acquired and operated with their accounts, as well as the groundbreaking solutions like AppBrilliance that rolled out since the acquisition went public?

Maybe the Justice Department has an explanation for this in a recent complaint:

“On Jan 13, 2020, Visa signed to take over Plaid with hidden intentions to get rid of competition risks and safeguard its market dominance in online debit.” Visa accepted to purchase Plaid at $5.3 billion “an unexpected revenue more than 50x” and Visa’s 2nd biggest merger ever.

Noticing that the acquisition “doesn’t hunt on monetary grounds,” Visa’s CEO agreed to the exaggerated merger price for “strategic, not financial” reasons claiming its US business is “critical” and the company must do “what it takes to safeguard this business.”

Final Words

Payment watchdogs have a challenging task ahead. As bigwigs look to monopolize the market, they must protect smaller market players to ensure fair competition.