Success Story of Plaid - How Is It Connecting the Financial World With One Tap?

Company Profile is an initiative by StartupTalky to publish verified information on different startups and organizations. The content in this post has been approved by Plaid.

The way in which people pay for their day-to-day purchases is changing drastically. We're approaching a new era where using digital wallets for payment is the mainstream option. Account-based payments are at the heart of this change as more money moves online and more consumers use financial applications and services. Plaid acts as a middleman for your private bank account and the financial mobile apps you use.

In general, users are required to link their bank accounts to utilize the fintech platforms, enable the applications to evaluate financial statements and be able to deposit and withdraw money. The issue has historically been that each bank has a unique, complicated existing system that necessitates app developers to create unique links for every one of them, which may also lead to several security issues. By providing an intermediary connection layer, Plaid addresses this issue by providing a safer way for people to connect their financial accounts to an app.

Plaid - Company Highlights

Plaid - About
Plaid - Industry
Plaid - Founders, and Team
Plaid - Startup Story
Plaid - Name, Logo, and Tagline
Plaid - Mission, and Vision Statement
Plaid - Products
Plaid - Business Model
Plaid - Funding, and Investors
Plaid - Investments
Plaid - Acquisitions
Plaid - Competitors
Plaid - Challenges Faced
Plaid - Future Plans

Plaid - About

In 2013, Zach Perret and William Hockey established the American financial services business Plaid. The main offering is a platform that lets customers link their bank accounts to different fintech firms. Customers may connect well-known financial technology apps to their conventional bank accounts using Plaid's network service programming interface. The company's platform accesses financial transactions and individual data from large numbers of financial companies, validating and validating it in real-time while enabling clients and companies to use financial technology apps to communicate with their bank accounts, inspect balances, and transfer money.

The Plaid technology platform provides the resources and access required to create a financial system with digital capabilities. Plaid thinks that its platform makes it simpler and safer for developers to create financial services and apps. In the beginning, Plaid offered an API to help developers link customers and financial institutions. Since then, they have used a variety of data analytics technologies in conjunction with their access to data to give further actionable insights.

How Plaid Works

Over 11,000 financial institutions in the US, Canada, and Europe are connected with Plaid. It's simple to link your bank account to Plaid:

Step 1:  You can choose your banking institution from a list when you sign up for an app supported by Plaid. Put in your username and password next.

Step 2: Plaid encrypts the information you've decided to share (such as your account balance) and securely sends it to the app you wish to use in a couple of seconds. Your username and password are never shared between the platform and the app.

Step 3: A safe, continuing connection between the app and your bank is being built by the firm in the background.

Plaid - Industry

The term "financial services" refers to the monetary services provided by the banking sector, which comprises a wide range of companies that balance a budget, which includes credit unions, financial institutions, individual asset managers, card companies, insurance providers, accounting firms, consumer finance firms, brokerage firms, investment funds, and some govt-sponsored entities. Several other businesses that depend on credit and loans to function are supported by financial services. Despite mixed findings, the majority of estimates place the financial services industry at 20–25% of the global GDP.

With a compound annual growth rate (CAGR) of 9.7%, the worldwide financial services market increased from $23,319.52 billion in 2021 to $25,588.3 billion in 2022. At least temporarily, the Russia-Ukraine conflict hampered the possibilities of a COVID-19 pandemic-related global economic rebound. Economic sanctions on many nations, a rise in commodity prices, and disruptions in the supply chain as a result of the conflict between these two nations have all had an impact on several markets throughout the world. At a CAGR of 6.9%, the financial services industry is anticipated to reach $33,358.77 billion in 2026.

Plaid - Founders, and Team

Plaid was started in 2012 by Zachary Perret (CEO) and William Hockey in San Francisco, California.

Zachary Perret

As Plaid's co-founder and CEO, Zachary Perret leads the company. He formerly had a consultant position at Bain. He attended Duke University to complete his undergraduate studies.

William Hockey

Plaid's co-founder, William Hockey also cofounded a company named Column. He was formerly an Associate with Bain & Company. William Hockey attended Emory University for his bachelor's degree.

Some other team members include :

• Helen Min - Head of Marketing
• Jean-Denis Greze - Chief Technology Officer
• Pouya Fatemi - Head of Business Operations & Finance
• Paul Williamson - Head of Sales
• Eric Sager - COO
• Luke Miner - Head of Data Science

Plaid - Startup Story

Zachary Perret and William Hockey, the founders, really got to know one another while interning at the titan of consulting, Bain & Associates. They clicked right away and started experimenting with other entrepreneurial concepts they may eventually pursue.

They first decided to create a platform for managing and recommending customer finances. Unfortunately, it turned out to be much more difficult than anticipated.

They had to create unique connections with each bank to connect to the financial accounts of the customers they planned to serve. Some of those possible banking partners were still utilizing technology from the 1950s, which complicated matters further (such as COBOL).

The couple saw right away the challenges even the most basic traditional banking system posed. Initially, the internet was not taken into consideration while designing banking; instead, branch-based consumer contact was emphasized. Today, the average user interacts with their bank accounts through more than 15 web applications. Consequently, the team realized that for people to realize the potential of their financial identities fully, the financial services industry needed to be revolutionized.

Plaid started as a consumer app company and invested around six months in creating card-linked financial management software. For instance, Plaid's restaurant suggestion service used the user's past spending information to suggest new restaurants. The items were made to persuade customers to cut back on their spending. Then they stopped and wondered if they needed an app that advised users to cut back on their spending. In no way. The company came to the same conclusion after working with a Venmo client. As a result, Plaid changed its direction and is now working to provide a genuinely straightforward and interoperable infrastructure for the financial sector.

Plaid was finally able to obtain its first round of investment as more and more clients were added. Spark Capital and several other investors invested $2.8 million in the business in September 2013.

With the additional funds, Plaid was able to relocate its corporate headquarters from New York to San Francisco, where it had access to a far larger number of software engineers and FinTech firms who were eager to work with it.

In the following three years, Plaid mainly avoided the spotlight and concentrated primarily on enhancing its service and gaining new customers. That changed when it revealed a massive $44 million round headed by Goldman Sachs in June 2016.

Plaid - Name, Logo, and Tagline

Plaid's tagline says, "The safer way for people to connect financial accounts to an app"

Plaid - Mission, and Vision Statement

Plaid's mission statement says,

"Plaid is focused on democratizing financial services through technology. We build beautiful consumer experiences, developer-friendly infrastructure, and intelligent tools that give everyone the ability to create amazing products that solve big problems."

Plaid - Products

With Plaid's collection of APIs, developers can create fantastic financial solutions with ease.

• Assets - Asset and Account Owner Verification API for Underwriting
• Auth - Instant bank account verification
• Balance - Verify  bank account balance
• Identity - Verify users' identities
• Identity Verification - Global IDV to ensure KYC compliance
• Income - Income and Employment Verification API
• Investments - Retrieve liabilities and loan data
• Monitor - Easy AML and PEP Compliance
• Signal - ACH Risk Assessment and scoring API
• Transactions - Access transaction data

Plaid - Business Model

With Plaid's freemium business model, customers may utilize all of its services for free. With the free plan, potential customers may connect to 100 bank accounts and evaluate sample data in a sandbox environment.

For extra capability, there are two premium subscription plans available. Before we get into these alternatives, it is crucial to realize that the company's pricing strategy is not meant to pressure a prospect into choosing from a menu of plans. Instead, the strategy permits a brand-new user to become acclimated to the free platform before upgrading to a personal account that is catered to their requirements.

In light of it, the following are the paid programs:

• Launch: Users may authorize accounts, track transactions, and view account balances with Launch, a pay-as-you-go option. The price information is available upon request.
• Scale: Prices for this more specialized service start at $500 per month and include bulk pricing, specialist premium support, and integration assistance. Customers who sign up for this package get full access to user data about their financial investments, obligations, and possessions. For example, this data may be employed to decide whether to approve or reject a loan application.
• Costs per request: Plaid charges a certain amount for each request. The user must ensure that the receiving account has enough funds, to begin with if their financial app allows account transfers. To enable the transfer and generate revenue for the app company, Plaid will review the member's account.

Following the consumer's selection of a paid plan, the following costs could be assessed:

• One-time fees: Fees are assessed for services that must be completed just once. For instance, a one-time fee must be paid each time a personal financial app accepts a user account and verifies their identity.
• Membership dues: The same personal finance program would also like to know how its customers are spending their money. The company does this by utilizing Plaid's real-time account balance monitoring tool. Because this is a frequent action, the expense is charged as a recurring subscription cost. Plaid gives volume discounts and assesses a per-connection, per-month fee for this service.

Plaid - Funding, and Investors

Plaid - Investments

Plaid - Acquisitions

Plaid - Competitors

The top competitors of Plaid are :

• Codat
• Stripe Connect
• MX
• Lightico
• Envestnet Yodlee
• Flinks
• IntSig OCR Solutions
• TrueLayer

Plaid - Challenges Faced

Zach Perret, the company's founder, claims that paper is their greatest opponent and that digitizing data is their biggest challenge. The first line of defense is the availability of precise and understandable data. Analytics and other value-added services will now be the focal point of the conflict. As a result, Plaid gave data engineers priority before giving data scientists any thought.

If there is anything, it is stated that security will be the entity that keeps Plaid's employees up at night. Data security and privacy are essential since they are in charge of millions of people's financial information. In order to accomplish this, Plaid incorporates a tiny infrastructure element into each application, which collects user credentials and tokenizes them on the user's device. By sending this tokenized data via its system, it then makes sure that the original data is not made public. You can never stop thinking excessively about security, according to the designer.

Plaid - Future Plans

Plaid set a target last year to dedicate 75% of our traffic to APIs by the end of 2021. One of the company's major aims is to provide fair, dependable, and secure API-based data sharing as the sector accelerates its transition to a completely digital financial system.

The recent partnerships between Plaid and other companies show the industry's commitment to building a better ecosystem that allows users more control and choice over where and how their information is shared across digital tools. With projects like Plaid Portal, a tool (now in beta) that allows users to examine and manage their account connections, helping to guarantee that they retain control over where their data is shared, innovation will continue in this area.

In significant ways, Plaid is assisting the industry in meeting this historically high level of consumer demand for digital banking. First, Plaid can integrate to provide more dependable data connectivity on behalf of the company's shared customers and the developers constructing its network for banks with the capacity to implement an API-based data interchange. The sector must continue to adopt cutting-edge digital solutions that provide customers easy access to their financial information so they may better manage their daily lives as the globe gets closer to an open finance future.

FAQs

Who is the CEO of Plaid?

Zach Perret is CEO of Plaid.

Where is the Headquarters of Plaid?

The headquarters of Plaid is in San Francisco, California.

How much funding has Plaid raised?

Plaid has raised a total of $734.3M.

Is Plaid a Unicorn?

Yes. Plaid is currently valued at $13.4 Billion.