Fintech is Everywhere
The financial services landscape is rapidly changing. User adoption has skyrocketed in recent years. In 2019, 75% of people with internet access used a fintech application for money movement compared to just 18% in 2015. However, the financial system is historically very disjointed. Anyone who has ever waited for a few cents to be deposited into their bank account to confirm their account has been verified in the traditional way knows that this isn’t a great user experience.
This is where Plaid comes in. Plaid serves as a gate-lifter in a highly fragmented industry. Their services allow users to access new financial service products including Venmo, Robinhood and Coinbase that require a link to their bank accounts. Being the go-to connector of financial services data has proven to be incredibly valuable as Visa announced it would be acquiring Plaid for $5.3 billion dollars in January 2020.
Discretely Connecting Apps with Banks
It might come as a surprise to discover that one in four people with a bank account in the U.S. has used Plaid’s services. Flying under the radar is a key element of Plaid’s strategy. Below is the interface a user sees when they add a bank account on Betterment. Although a user may believe this is an interface with Chase, their bank, in fact they are supplying their banking credentials to Plaid.
Online banking credentials are some of the most sensitive data for an individual. If Plaid was not so discrete about the service they are providing, a user may be less likely to provide their banking login information to a third party they may not be familiar with.
Easy Access for Consumers
Plaid makes the customer experience simple for any app that requires users to connect to their bank account. In a matter of minutes, a user can now connect their bank account to many popular apps including Venmo, Chime and Betterment.
Through these integrations, fintech apps can pull data on a variety of financial information for a user including:
- Verifying real time account balances
- Investment portfolios
- Liabilities including student loans
- Income and employment verification
Further, Plaid’s services provide access to fintech products for customers who do not bank with a major institution. Since Plaid has built integrations with thousands of financial institutions it is highly likely that a user’s bank will be available to connect with. No bank wants to disappoint customers who want to connect their account to a third-party app by not providing an integration. However, it would be challenging to integrate with every app that one of their customers may want to use. This is why banks are willing to work with Plaid and build just one integration that will work with apps across the industry.
Supporting Fintech Innovation
In addition to providing consumers with easy access to new fintech apps, Plaid makes developing new fintech products much simpler. In a world without Plaid, a developer of a new app that requires access to a users’ bank account would have to build out custom integrations to many financial institutions. This is not only costly but also slows down the development and innovation process. Building integrations with financial institutions can be particularly challenging since many banks do not have APIs that provide access to an individual user’s account. For those that do, their APIs are not consistent with each other. Plaid’s services allow developers to integrate with just one company seamlessly allowing new products to reach customers sooner.
With one of the world’s largest card payment organizations now behind it, it will be interesting to see what the future has in store for Plaid. First, the acquisition provides Visa with control over core fintech infrastructure and the data that comes with it. By buying the gate keeper of fintech data, Visa has positioned itself to be able to charge transaction and set-up fees on the increasing number of transactions happening via apps. Second, Visa now has access to insight of small, but potentially disruptive, companies that Plaid is integrated with. This could provide valuable information into threats and opportunities for Visa. Finally, Visa’s global footprint can help Plaid expand its presence enabling fintech transactions around the world.