Visa's new investment in a startup backed by Goldman Sachs and a16z shows how financial firms are tackling the thorny issue of third-party data sharing
- Just two days after announcing its intent to buy unicorn Plaid for $5.3 billion, Visa is putting resources into another fintech.
- Data-security startup Very Good Security (VGS) on Wednesday said it received a strategic investment from the payments giant.
- VGS offers a platform to store sensitive user data like medical information and credit card numbers on behalf of its customers.
- Customer data has already proven a hot topic for 2020. Earlier this month, the Financial Times reported JPMorgan plans to ban third-party apps from using customers' passwords to access its bank accounts.
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Just two days after saying it plans to buy unicorn Plaid for $5.3 billion, Visa is putting resources into another fintech.
Data-security startup Very Good Security (VGS) said on Wednesday that it received a strategic investment from the payments giant. VGS offers a platform to store sensitive user data like medical information and credit-card numbers on behalf of its customers, typically startups, thereby allowing companies to avoid handling the data themselves.
VGS counts buzzy fintech upstarts Brex, Petal, and Goldman-backed Deserve as customers, among others.
Visa's investment is an extension of VGS's $35 million Series B in October, which was led by Goldman Sachs. The startup is no stranger to prestigious names on its cap table. Andreessen Horowitz led its $8.5 million Series A in 2018, which also included participation from Nyca Partners.
Data security
By storing customers' data with VGS instead of internally, startups reduce the risk of data leaks and hacks, and don't have to spend as much on cybersecurity. VGS was one of 30 cybersecurity startups to watch, a VC told Business Insider in early 2019.
Customer data has already proven a hot topic in 2020. Earlier this month, the Financial Times reported JPMorgan plans to ban third-party apps from using customers' passwords to access its bank accounts.
On Tuesday's fourth-quarter earnings call, JPMorgan CEO Jamie Dimon reiterated his concerns around outside parties collecting customers' data when linked to their bank accounts.
Visa, too, briefly touched on the issue on a call announcing its intent to buy Plaid on Monday. Al Kelly, the company's CEO and chairman, acknowledged some financial firms "would prefer Plaid operate differently in some cases," and indicated the payments giant would take that into consideration.
VGS announced in a blog post in November a partnership with Plaid to offer mutual customers preferential pricing.
"Joint customers of VGS and Plaid can enable their end-users to link their bank accounts from 15,000 financial institutions, without ever needing to store sensitive data on their servers," wrote Amanda Heinemann, business development and partnerships at VGS, in the post.
Corporate venture capital is flooding Silicon Valley
VGS isn't the only startup attracting the eyes of corporates like Goldman and Visa. Corporate venture-capital arms invested a record $9.6 billion in startups as of mid-December last year, according to CB Insights.
Visa isn't the most active payments firm, making six venture investments since 2014, compared to Amex with 57 and PayPal with 28, according to CB Insights. But Visa's current portfolio includes buzzy fintech unicorns like PoS lender Klarna and card issuing platform Marqeta.
In addition to Visa's investment in VGS, the fintech is a partner on the credit-card giant's Fintech Fast Track program, which lets startups tap into Visa's payments network as they go to market.