Plaid
Democratizing Financial Services

As businesses worldwide closed their doors last year due to the pandemic, people turned to the web to continue their lives – whether buying groceries, seeing friends and family, exercising, or working. Nowhere was this clearer than in financial services, as consumers rapidly shifted their entire financial lives online. A decade of gradual digitization was punctuated by a year of sudden adoption. Whether paying bills, managing loans, applying for PPP, receiving stimulus checks, buying stocks, or just managing money day-to-day, hundreds of millions of consumers began to see digital finance as the new normal.

The term “fintech” – coined to describe a wave of digital disruptors – has given way to a broader digital finance industry. Mobile banking is no longer the realm of startups, but rather the norm for main street banks. Not only have most of our financial interactions moved to the web, but the number of people that have access to high-quality financial products has massively increased. Digital finance is everywhere, but the true transformation is still ahead of us.

One company that is at the center of the digital transformation in finance industry is Plaid. The company is on a mission to empower consumers and unlock financial freedom for everyone. “As fintech continues to expand and improve the financial lives of billions of people worldwide, we are proud to be at the forefront of 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,” says Zachary Perret, CEO of Plaid.

Primarily, Plaid provides APIs that link consumer bank accounts to apps and other financial services, making it the connective tissue of the fintech boom. Financial apps can help consumer bank account holders save money, make a budget, transfer money, and more. To be able to do these things, most apps need to connect to their financial accounts. Plaid provides the technology that enables that connection for thousands of financial apps. Whether it is an account at a national bank, a local bank, a credit union, an investment bank, or a digital bank, Plaid helps clients get connected.

Bridge to Connect Financial Accounts

Plaid lets businesses connect their financial accounts to various apps in seconds. It is done by ensuring utmost safety. In fact, the company was founded on the principle that users must have a right to their financial information — they should get to decide where, how, and with whom it’s shared. That’s why every Plaid product is built with control, security, and transparency in mind.

Plaid works to transfer your data securely from users’ financial accounts with any app. The company doesn’t share personal information without users’ permission, and they don’t sell or rent it to outside companies.

It allows users to see the types of data shared with each app. It allows them to disconnect apps from their financial accounts any time they want, and delete data stored in Plaid’s systems. The users can also control which apps have access to their data. When clients choose to connect their financial accounts to an app using Plaid, they will be prompted to enter the username and password associated with those accounts. Plaid then links clients’ accounts to the app they want to use so they can share their data.

To help keep clients’ data safe, Plaid doesn’t share the username and password with any financial institution or apps. Once the user gives them permission to share their financial data, then Plaid securely transfers it from clients’ financial institution to the app through its robust application programming interface (API).

To strengthen its data protection, Plaid makes use of Advanced Encryption Standard (AES-256) and Transport Layer Security that helps them to keep clients’ personal data safe. The company also uses secure cloud infrastructure technologies and performs security audits by researchers and financial institutions.

Building financial life powered by Plaid

With such unparalleled capabilities, Plaid has helped several clients achieve success since its inception. Today, tens of millions of people in North America (and counting) have successfully connected their financial institutions to apps they love using Plaid. In one instance, Plaid helped Varo, an online mobile banking company to democratize their premium financial services. Varo needed a way for users to seamlessly link their external bank accounts to Varo—as well as a way for users to link their Varo accounts to outside apps and institutions. The existing technology that Varo was using to link customers’ external bank accounts wasn’t living up to user expectations. The process wasn’t intuitive, and less than half of linking attempts were successful. As a result, Varo was receiving a high volume of customer complaints.

When a previous vendor wasn’t up to the job, Varo turned to Plaid. They compared things like institution coverage, data quality, linking speeds, user experience—and ultimately selected Plaid. In just five months, more than 176,000 Varo customers have used Plaid Direct to connect their Varo accounts to outside apps and services.

How did that happen?

Varo uses Plaid for two main things. The first is allowing users to connect their outside bank accounts to Varo. The second is exporting data from users’ Varo accounts to outside apps and services: places like Acorns, Betterment, and Schwab.

In the first case, Varo allows customers to connect their outside bank accounts. That way, customers can fund their Varo accounts via ACH transfer. They can also see their outside bank account balances and transactions in the Varo app. From Varo’s point of view, the ability to see the customer’s wider financial life allows Varo to provide more relevant offers for financial products and services.

Since launching its Plaid integration, Varo has seen a 15 percent improvement in the success rate of linking customers’ external bank accounts. As a result, the topic is no longer a significant driver of calls to Varo’s customer service team. According to Pelham Burn, linking was once a top-five customer service issue. Now, with Plaid, it doesn’t break the top ten.

In the second case, Varo allows users to send data from their Varo accounts to outside apps and services. That way, they can see their Varo account balance and transactions in a budgeting app like Truebill. They can also use their Varo account to fund savings apps like Digit or Acorns.

Another notable Plaid’s service is Plaid Direct, and the take up has been tremendous. Every day, more than 1,500 Varo customers use Plaid to connect their Varo accounts to outside apps and services. In fact, in the five months since Varo started offering Plaid Direct, more than 176,000 Varo users have taken advantage of the service.

In 2020, Varo aims to become the first nationally chartered bank built for people who bank on their smartphones. In the fall of 2018, they received preliminary approval from the Office of the Comptroller of the Currency. The goal is to become a true challenger to legacy financial firms—without losing sight of the customer’s best interests. Competing on that level means developing products and services on par with the market’s biggest banks. And that will require some great data. “Plaid lets us see the full picture, so we can develop products and services to truly support our customers.” Pelham Burn explained. “That is helping to deliver our transformation.”

Paving way for a Promising Future

Today Plaid is excited to share that they have raised a $425m Series D financing to help scale its platform to support the massive growth in fintech, and enable the next generation of digital financial services. The company brought on new investors Altimeter Capital, Silver Lake, and Ribbit Capital who joined existing investors, including Andreessen Horowitz, Index Ventures, Kleiner Perkins, New Enterprise Associates, Spark Capital, and Thrive Capital in this round.

Looking ahead, Plaid is focused on creating a single, integrated platform dedicated to helping innovators build digital financial products. Doing so requires scaling to meet the increased use of fintech, expanding globally to meet international demand, and delivering an expanded set of platform products to our customers. This will include continued investment in APIs that help people connect a complete view of their finances, as well as tools and services to support enhanced privacy, personalization, decisioning, and automation. “We could not be more excited for the years to come,” concludes Perret.