Quovo, one of the biggest names in data aggregation for the wealth management and brokerage industries, will be acquired for $200 million by rival startup Plaid, according to Bloomberg.
Like Quovo, Plaid facilitates data connections between banks and technology startups. When a user name and password for a bank accountare entered, Plaid checks those credentials with the financial institution. If they're accurate, Plaid passes banking information back to the app.
Plaid counts some of the most popular consumer-facing fintech startups among its clients. Cryptocurrency exchange Coinbase, PayPal's peer-to-peer payments app Venmo and stock-trading app Robinhood have all used Plaid.
The San Francisco-based startup was the subject of a bidding war among venture capitalists and at least one tech company, ultimately resulting in a $250 million investment last month.
But Plaid primarily interacts with checking and savings accounts, so it's using part of that investment to buy Quovo, which works in aggregating investment and brokerage data.
Traditional firms like Janney Montgomery Scott, digital advice companies like Betterment and adviser-facing technology vendors like Advizr and Advicent use Quovo's data aggregation. Quovo is also popular among independent advisers and broker-dealers, attracting investments from big names like Ron Carson, Steven Lockshin and Marty Bicknell.
"This represents the merging of two complementary but both very important businesses," Zach Perret, Plaid's CEO, told Bloomberg.
In a blog post, Mr. Perret and co-founder William Hockey said acquiring Quovo will help build a single platform software developers can use to build financial applications that can handle everything from payments to lending to wealth management.
"Combining our platforms will create a better experience for our customers while also enabling new services to be developed that consider the full financial picture of today's consumer," Quovo co-founder and CEO Lowell Putnam added in his own blog post. "It is our sincere hope that it ushers in a new wave of innovation, from the smallest startups being founded today to disrupt the status quo, all the way to the largest banks in the world that are looking to supercharge their customer relationships with data."
The arcane business of securely transmitting banking data online had long been dominated by a company called Yodlee. It was established in 1999, signed on several large banks and went public in 2014. Less than a year later, financial services company Envestnet Inc. bought Yodlee for $660 million.
ByAllAccounts, another aggregator focused on independent financial advisers, asset managers and broker-dealers, was sold to Morningstar for $28 million in 2014.
The upstarts like to draw contrasts to Yodlee, particularly in the area of customer privacy. When someone uses one of these services to log in to their bank, the provider can see their bank balances and other information. Yodlee has been criticized for selling anonymized user data reports to hedge funds. Plaid and Quovo say they don't.
In 2016, Goldman Sachs Group Inc. led an investment in Plaid that valued the business at less than $500 million. Last year, Square Inc. expressed interest in acquiring Plaid for about $1 billion, said people familiar with the matter. Square, which makes cash registers and payment software, has been expanding into online financial services, such as a lending business and a Venmo-like app to pay friends. The talks, which haven't been previously reported, failed to result in a deal. Square and Plaid declined to comment.
In the ensuing months, VCs jockeyed for a piece of Plaid. One investor pledged to buy shares at more than four times the share price of the earlier funding round. Mary Meeker of Kleiner Perkins Caufield & Byers came in with an even higher bid. She won in a deal last month that valued Plaid at $2.65 billion.
Signing on all the big names in finance was a challenge. Last summer, Plaid was in a very public disagreement with Capital One that has since been resolved. It recently locked in an agreement with JPMorgan Chase & Co., a longtime holdout.
Plaid's revenue last year was close to what Yodlee was generating four years ago, said a person familiar with Plaid's financial performance. That number was $89 million. In order to live up to the hype, Plaid knows it will have to expand faster. Tuesday's deal could help with that.
Additional reporting provided by Bloomberg.