Plaid is a

financial services Financial services are the Service (economics), economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, acco ...

company based in

San Francisco, California San Francisco (; Spanish for " Saint Francis"), officially the City and County of San Francisco, is the commercial, financial, and cultural center of Northern California. The city proper is the fourth most populous in California and 17th ...

. The company builds a data transfer network that powers

fintech Fintech, a portmanteau of "financial technology", refers to firms using new technology to compete with traditional financial methods in the delivery of financial services. Artificial intelligence, blockchain, cloud computing, and big data are r ...

and digital finance products. Plaid's product, a technology platform, enables applications to connect with users’ bank accounts. It allows consumers and businesses to interact with their bank accounts, check balances, and make payments through different financial technology applications. The company operates in the U.S., Canada, the UK, France, Spain, Ireland, and the Netherlands. On January 13, 2020,

Visa Visa most commonly refers to: *Visa Inc., a US multinational financial and payment cards company ** Visa Debit card issued by the above company ** Visa Electron, a debit card ** Visa Plus, an interbank network *Travel visa, a document that allows ...

announced it was intending to acquire Plaid for $5.3 billion. Visa later abandoned the deal after opposition by the

United States Department of Justice The United States Department of Justice (DOJ), also known as the Justice Department, is a federal executive department of the United States government tasked with the enforcement of federal law and administration of justice in the United Stat ...

due to data privacy, antitrust risks and monopolist reasons.

History

Plaid was founded in 2013 by Zach Perret and

William Hockey William Hockey (born 1989) is an American engineer and entrepreneur. He is best known for having started Column N.A.. and co-founding and running financial services company Plaid (company), Plaid. Biography Hockey was born in San Luis Obispo, ...

. The pair originally attempted to build consumer financial management products, including budgeting and bookkeeping software. When confronted with difficulties in connecting bank accounts required for these tools, they decided to pivot their core business focus to a unified banking

API An application programming interface (API) is a way for two or more computer programs to communicate with each other. It is a type of software interface, offering a service to other pieces of software. A document or standard that describes how ...

Services

Plaid builds a data transfer network that powers Fintech and digital finance products. From the consumer side, this means they allow common apps such as

Venmo Venmo is an American mobile payment service founded in 2009 and owned by PayPal since 2013. Venmo was aimed at friends and family who wish to split bills, e.g. for movies, dinner, rent, or event tickets etc. Account holders can transfer funds ...

and Chime to offer banking services without having to develop all the infrastructure themselves. For immediate linking of their bank funds, users of the apps are required to share their bank login credentials with Plaid. For some banks, Plaid will not receive user credentials and instead users will authorize access to bank data through their bank's portal. In October 2020, Plaid announced the "all-new Plaid Link" to reduce the steps necessary to connect financial products.

Funding

In late 2013, Plaid raised a $2.8million seed round from

Spark Capital Spark Capital is a venture capital firm in the United States, responsible for early-stage funding startups of consumer, commerce, FinTech, software, frontier, and media sectors. It has branches in San Francisco, Boston, and New York City. Hi ...

Google Ventures GV is a venture capital investment arm of Alphabet Inc., founded by Bill Maris, that provides seed, venture, and growth stage funding to technology companies. Founded as Google Ventures in 2009, the firm has operated independently of Google, Alph ...

, and

New Enterprise Associates New Enterprise Associates (NEA) is an American-based venture capital firm. NEA focuses investment stages ranging from seed stage through growth stage across an array of industry sectors. With ~$25 billion in committed capital, NEA is one of the w ...

. In 2014, Plaid raised $12.5million from

. On December 11, 2018, the company announced a $250million Series C round with a valuation of $2.65billion. The funding round was led by

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, with

Andreessen Horowitz Andreessen Horowitz (also called a16z, legal name AH Capital Management, LLC) is a private American venture capital firm, founded in 2009 by Marc Andreessen and Ben Horowitz. The company is headquartered in Menlo Park, California. Andreessen H ...

and

Index Ventures Index Ventures is a European venture capital firm with dual headquarters in San Francisco and London, investing in technology-enabled companies with a focus on e-commerce, fintech, mobility, gaming, infrastructure/ AI, and security. Since its ...

joining as new investors. Former backers Goldman Sachs, NEA and

also participated. It was later revealed by Plaid that both

and Mastercard had invested in the round. On April 7, 2021, Plaid raised a $425million Series D at a valuation of $13.4 billion.

Acquisition

In January 2019, Plaid acquired competitor Quovo for $200 million. On January 13, 2020, Plaid announced that it had signed a definitive agreement to be acquired by

for $5.3 billion. The deal was double the company's most recent Series C round valuation of $2.65 billion, and was expected to close in the next 3–6 months, subject to regulatory review and closing conditions. According to the deal, Visa would pay $4.9 billion in cash and approximately $400 million of retention equity and deferred equity, according to a presentation deck prepared by Visa. Visa’s CEO Alfred Kelly described the acquisition as an "insurance policy" to neutralize a "threat to our important US debit business." On November 5, 2020, the

filed a lawsuit seeking to block the acquisition, arguing that Visa is a

monopolist A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a speci ...

trying to eliminate a competitive threat by purchasing Plaid. Visa said it disagrees with the lawsuit and "intends to defend the transaction vigorously." On January 12, 2021, Plaid announced the proposed merger agreement had been officially terminated almost exactly a year after its initial public announcement of the deal. In January 2022, Plaid announced it had acquired the identity verification and compliance platform, Cognito, for an undisclosed sum.

Controversy

The company has faced controversy for scraping user data, impersonating bank login screens, and not properly disclosing the privacy risks associated with the service.

TD Bank Toronto-Dominion Bank (french: links=no, Banque Toronto-Dominion), doing business as TD Bank Group (french: links=no, Groupe Banque TD), is a Canadian multinational banking and financial services corporation headquartered in Toronto, Ontario. ...

filed a lawsuit against Plaid in 2020 accusing the company of trying to "dupe" its users. In 2021, Plaid settled a $58 million class action lawsuit over claims that it passed on personal banking data to third party firms without user consent. The settlement encompasses five separate lawsuits combined as one. Each claims that Plaid used consumers’ banking login credentials to gather and distribute detailed financial data without prior consent. Plaid has "exploited its position as middleman," the plaintiffs alleged. Approximately 98 million people are affected by the settlement. Claimants will be given the option to receive the settlement money automatically through payment platforms such as PayPal and Venmo.

References