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Fintech firm Plaid has acquired Cognito, an identity-verification and compliance company, in its first major deal since calling off its merger to
Visa
about a year ago.
Financial terms of the transaction, which closed earlier this month, weren’t announced. A person familiar with the situation said the purchase price was $250 million in cash and stock. All of Cognito’s 18 employees are joining Plaid.
Founded in 2014, Cognito’s platform provides the tools and data sources that companies use to automate identity verification, including Know Your Customer procedures and anti-money-laundering screening. Hundreds of fintechs use Cognitos’s technology, including Plaid customers like
Affirm Holdings
(ticker: AFRM), the buy-now-pay-later fintech, and payments API provider Wyre. Cognito has raised $2.1 million in funding, Crunchbase said. Investors include Khosla, Battery Ventures,
Lightspeed
,
and Y Combinator.
Cognito CEO Alain Meier will run the product group and report directly to Plaid CEO Zach Perret. “Plaid believes in our vision to drastically reduce the overhead of onboarding customers for all fintech applications. With Plaid backing us, we will continue to build amazing products for years to come,” Meier said in a blog post announcing the deal.
Plaid lets users connect their bank accounts to finance apps and transfer money. The San Francisco company integrates with more than 12,000 financial institutions. For example, Plaid’s technology lets Venmo’s customers pay their friends and family. Plaid has over 5,500 customers, including
PayPal Holdings
(PYPL),
Robinhood Markets
(HOOD),
SoFi Technologies
(SOFI), and
Coinbase
(COIN).
Plaid estimated that 90% of its customers need Know Your Customer procedures to help prevent identity theft, money laundering, financial fraud, terrorism financing, and other financial crimes. “When built into customer onboarding processes for digital finance apps, Cognito provides a great user experience that enables companies to successfully onboard more customers and reduce fraud,” Plaid CEO Perret said in a different blog post.
The Cognito acquisition comes about a year after Plaid scrapped its $5.3 billion sale to Visa (V). Cognito is also Plaid’s first major deal since it acquired Quovo in 2019. Plaid did acquire Flannel, which produces APIs for money transfers, last year. It also raised $425 million in funding, led by Altimeter Capital and Silver Lake. In all, Plaid has collected $735 million in funding at a reported $13.4 billion valuation.
Write to Luisa Beltran at luisa.beltran@dowjones.com
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