If you have ever tried to connect your bank account to other third-party payment apps like Venmo, Square, Stripe, or Acorns, you have most likely used Plaid without even realizing it. Plaid sits in the middle of these apps and your financial institution to ensure your financial information remains safe and secure.
Summary
- Plaid is a fintech company that acts as an intermediary between your financial institution and third-party payment apps to securely authenticate and transfer your financial information
- Plaid’s software is extremely secure and reliable for both consumers and businesses as a result of their above industry-standard encryption protocol
- They communicate with your banks’ technology when a transaction takes place and ensure the data updates accordingly on their app
The Plaid Company
Plaid is a fintech company based in San Francisco California that was founded in 2013 by Zach Perret and William Hockey. Zach and William originally started by first building financial budgeting and bookkeeping software, but when they saw the difficulty in integrating bank accounts required to use these tools, they decided to shift their business model to create Plaid.
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Plaid’s business model focuses on building unified banking APIs which help consumers authenticate their financial information between different companies.
What is Plaid and How Does it Work?
Plaid features a large suite of diverse financial products which can help both individual consumers and businesses better manage their financial data. Their software acts as an intermediary between your banking institution and other third-party payments apps. It ensures your financial data is securely authenticated between them through their encryption protocol system.
An example is an app like Venmo requiring your bank details to deposit your funds. This is where Plaid comes in. Plaid’s software authenticates and transfers your banking information secretly over to Square.
Instead of having to wait 2-4 days for Venmo to deposit funds to your bank and have you confirm the amounts, Plaids helps you to authenticate by simply logging into your bank and linking it up to Square instantly. The process is quick, easy, and secure.
Plaid For Consumers
Plaids suite of tools for consumers helps to safely connect your accounts and control their access. The Plaid app has an easy-to-use portal that allows you to view and control which apps you want to share data with Plaid. Their app allows you to:
- Control who has access to your financial data
- View your accounts and their related activity
- Connect and disconnects apps with ease
- See the type of data you have shared with Plaid in each app
- Delete stored data within Plaid
The great part about Plaid’s app is that it doesn’t charge consumers anything to use their app or service. Instead, Plaid charges apps like Stripe, Square, and Venmo a small fee to enable the connection. They also don’t sell or share your data with other third-party companies.
Different Plaid Products
Plaid is used by more than 4,000 different financial apps and connects to over 11,000 financial institutions around the globe. This massive network empowers Plaid to have different types of financial products to offer their clients. Some of them include:
- Transaction History Reporting
- Account Authentication
- Balance Verification
- Identity Verification
- Investment Monitoring
- Borrower Asset Verification
- Access Financial Loan Data
These products can help institutions and individuals handle their financial information in one central location. Gone are the days of having to keep track of multiple bank accounts, investment portfolios, and liabilities. Plaid empowers businesses and consumers to have everything in one spot.
Plaid Uses Cases
Plaid’s suite of products can help you improve visibility and manage your financial information. Their products can help you stay up to date on all your financial information at all times. Let’s take a look at some of their popular uses case for consumers.
Personal Finances
One of Plaid’s features for helping users manage their finances is consolidating their financial data and categorizing it to make it easy for users to analyze.
It allows you to better understand how well you manage your debts, how you save your money and helps you to better understand how your investments are performing.
Lending Solutions
One of the biggest problems and frustrations of lenders is being able to get a complete picture of a borrower’s financial information. The process is time-consuming and the information can be outdated. Plaid is extremely useful and powerful in this situation.
Lenders can quickly get access to a borrower’s bank information to verify deposits and all relevant information they need to complete loan approvals. Not only that but Plaid is certified and trusted by Fannie Mae’s underwriting system. Their lending solution allows companies to:
- Verify the borrowers’ identity
- Verify borrowers assets
- Checked their account balances in real-time
- Check borrowers current liabilities
- Authenticate borrower’s financial accounts
- Verify income and employment
All the data and information required by lenders can be handled and securely transferred by Plaid’s technology. It puts lenders in a position to have a clean, secure, and streamlined process for their loan applications.
Business Finances
A common problem faced by businesses is that planning payroll, business-related finance, and account processes can be time-consuming and very complex. Plaid solves this by helping users connect their financial accounts to a single app to help with mundane tasks such as:
- Quick payroll and payment enrollment
- Create better bookkeeping practices
- Streamline your expense management
- Better invoicing solutions
Once you integrate your business accounts to Plaid, handling all of these business-related tasks is much easier and smoother.
As you can see Plaid’s products have great uses cases that empower both businesses and consumers.
How Plaid Handles Your Data
As a business and a consumer, it’s important to have an understanding of how Plaid handles your sensitive financial information. Plaid has an easy three-step process they use to connect your financial institution to third-party payment apps.
Step 1 ) Link your financial accounts to third-party apps like Stripe, by providing your username and password associated with those financial institutions.
Step 2 ) Verify ownership of the accounts and retrieve your financial information.
Step 3) Securely process and share your information with the app you’re using with Plaid’s encryption protocol.
As you can see, Plaid’s process is simple and makes everything extremely easy for the user. Their security practices are above industry standards.
FAQ’s
Is Plaid Safe to Use?
Plaid uses an advanced encryption standard (AES-256) and Transport Layer Security (TLS) to keep your personal information safe and secure. It’s considered extremely safe and effective for businesses and consumers. On top of that, they have secure authentication procedures, stellar cloud infrastructure, robust API monitoring, and third-party security testing to ensure their APIs are managed effectively.
