Fintech start-up Plaid to buy competitor Quovo for $200 million in its first major deal

Fintech firm Plaid is making its first major acquisition.

The company announced on Tuesday it would buy a similar start-up called Quovo for just south of $200 million, according to a source familiar with the deal, who asked not to be named because negotiations were private.

Plaid’s technology links bank account to fintech apps like Venmo, Robinhood, Coinbase, and Acorns. As of December, the San Francisco-based company said 25 percent of people in the U.S. with bank accounts had connected to Plaid through an app. The start-up recently raised $250 million at a $2.7 billion valuation and added Kleiner Perkins partner Mary Meeker to its board.

Like Plaid, Quovo links customers’ financial accounts with consumer-facing apps. But the New York-based firm has historically focused on more investment and brokerage data. Its customers range from fintech companies including Betterment, Wealthfront and SoFi to incumbents like Stifel, Vanguard, Empower Retirement, and John Hancock.

Plaid’s focus has been primarily on checking and savings accounts. The marriage tees up Plaid for expansion and gives it another leg up in an application programming interface business it was already beginningto dominate.

In order to link bank accounts with Venmo and other applications rely on a protocol known as application programming interface, or API.

Plaid’s APIs have attracted investments from the venture arms of Goldman Sachs, Citigroup and American Express, and some say, has helped accelerate the growth of the payment sector over the past five years. The San Francisco-based firm is also backed by Andreessen Horowitz, Index Ventures, NEA, the venture arm of Google, and Kleiner Perkins, among others.

The analogy of a hair dryer often helps explain an API. When trying to plug a U.S. appliance into a foreign outlet, the volts and the physical shape of the plug won’t line up. If the plug is jammed in, the dryer will spark, overheat, or just not work. Plaid, in this case acts as the adapter, enabling the outlet (the bank in this metaphor) to connect with the hair dryer (Venmo, to use an example) and work.

“In acquiring Quovo, we are extending our capabilities to a wider class of assets,” Plaid co-founders Zach Perret and William Hockey said in a blog post. “Our goal is to make money easier for everyone, and doing so requires that we consider consumers’ financial lives holistically.”

Plaid also adds analysis on top of the bank account so app users are able to do things like budgeting or expense management. It can authenticate bank accounts for direct payroll deposits and electronic bill payments, verify someone’s identity, verify someone’s balance in real time and understand income and employment.

“Together, we’ll build a single platform that developers and large companies alike can use to build any financial application—from payments to lending to wealth management,” Plaid said.