Fintechs are making their own name in industry consolidation between banking and wealth management.
Quovo, the investment and brokerage aggregator used by Wealthfront, Stifel and Vanguard, is being acquired by Plaid, a competitor specializing in checking and savings account data.
The deal will position Plaid in the wealth managmenet sector, weeks a
“We built Quovo to solve finance’s complicated problems, not to compete with another startup, and Plaid felt the same way,” Lowell Putnam, CEO of Quovo, said in an email.
The two companies will complement one another in their offerings, according to Putnam. Quovo offers aggregation for wealth and investment data, while Plaid focuses on checking and savings accounts.
Another motivator for the deal: location.
While Plaid is located in San Francisco, “Quovo is based in New York, giving us a significant operation in the financial capital of the world,” Zach Perrett, CEO of Plaid, said in an email.
Neither company would disclose the terms of the deal, but Bloomberg News estimated the deal at around $200 million after performance bonuses, citing sources with knowledge of the matter.
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The giants have traditionally bought out the newcomers.
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The infusion comes as the financial services industry continues to search for safer ways for customers to share their account data with third-party apps.
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The leading independent robo wants to maximize excess assets left in checking accounts.
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“I think it’s a good number,” says Ryan Gilbert, a partner at Propel Venture Partners in San Francisco. “I’m not sure whether the transaction is all stock or whether there’s any cash involved. Certainly Plaid has achieved phenomenal success.”
While Plaid and Quovo both serve robos, Quovo aggregates data for large and established companies in the wealth management space, including Stifel and Vanguard.
“It speaks to the interest in the space,” Steve Smith, CEO of data aggregator Finicity, said in an email. “This is also going to be helpful for Plaid, which is newer in terms of developed connection.”
Sharing data has been a
Moreover, a majority of clients are uncomfortable sharing bank account login information and debit and credit card information with fintech apps, according to a
Companies like Quovo argue that their security systems are
Plaid has managed to negotiate agreements with major banks — the company moves data involving
“I think that train [the battle between aggregators and banks] has left the station. Banks and aggregators and fintechs and general industry players are working together in a new direction,” says Smith.
Growth at both fintechs have stemmed from PE investments — Plaid has raised $309.3 million in a little over five years, according to Crunchbase. Quovo has $21 million in funding in about the same time.
Plaid’s deal with Quovo will be a first step for the company, which has never made an acquisition.
“Integrating our two companies fully will take several months,” Putnam said. “Throughout that time, the main priority is to maintain our industry-leading connectivity to current customers.”
There is risk that the acquisition could lead to more competition in the space.
“We [may] see more seed stage startups pop up in this space, because they’ll say, ‘Look there’s consolidation — the big guys who are five years plus in age are getting together,’” Gilbert said.
Putnam and Perrett are optimistic about the deal.
“The acquisition was a win for both companies,” Putnam said.
