More and more fintech app users have gotten used to seeing Plaid’s logo pop up when they try to connect their bank accounts. Now Plaid is trying to play a similar role for crypto applications. The company is releasing a product for crypto developers Thursday that makes it easier for them to connect consumers’ crypto wallets to their apps.
Security is an ongoing challenge for crypto, and crypto wallets in particular are a vector of attack. A number of hacking and social engineering attacks have occurred that find various ways to connect to the wallets of unsuspecting users and drain their tokens. Plaid’s new product is a way to address those fears, but it also feeds into an ongoing debate over just how decentralized crypto can be while addressing consumers’ needs for secure, easy-to-use apps.
When consumers who want to use an NFT marketplace, blockchain game, or DeFi app click on a button to “connect wallet,” they will see a screen from Plaid pop up offering to connect their wallet of choice. Today coders have to custom-build wallet integrations for their own apps, which adds to the cost of development and introduces potential security risks.
Plaid’s Wallet Onboard has integrated with more than 300 wallets, including MetaMask, Coinbase Wallet, Trust Wallet, and Ledger, so consumers can choose almost any wallet they might want to use.
This makes it easier for developers since they will only have to integrate one time instead with multiple wallets. In addition, consumers using many different kinds of wallets, which can range from mobile apps and browser plugins to hardware wallets, will all see one way to connect.
Plaid is trying to address the security concerns around wallets by having any developer who wants to use its product go through its existing traditional compliance and risk checks, says Alain Meier, head of identity and fraud.
Plaid isn’t getting involved in any transactions between the apps and wallets it connects, and can’t see those transactions, Meier said.
Most wallets also ask for confirmation before proceeding, a step meant to prevent tricks designed to drain people’s wallets or keep people from connecting with a deceptive app. Plaid also plans to add more educational information for consumers about what they’re connecting to. Right now, by design in crypto, there is really no trusted intermediary to inform consumers about who they’re transacting with.
“Are you using a smart contract that’s been audited? Is the source code uploaded? We want to build all those things … to also make it even safer and more trustworthy for consumers,” said Clay Allsopp, crypto product lead at Plaid.
There is also the risk of giving too much information that consumers don’t want. “We could give them a lot of information but the question is, do consumers know how to interpret that information?” Allsopp said. “And then we could, on the other end of the spectrum, [add] a red screen that says, ‘Hey, this just looks suspicious.’ But I think what we're still trying to figure out is, what should our role be in that? What kinds of recommendations do we want to make?”
That’s one of the striking things about Plaid’s crypto offering. It’s bringing a centralized third-party authority to crypto in an area where that’s lacking. For many who are new to crypto or want the familiar feeling of the safety of a traditional finance application, they may welcome and trust Plaid’s involvement.
That’s one of the things Plaid is counting on: its brand recognition, since it already helps crypto exchanges such as Binance.US and Gemini with things like bank connections or sharing crypto data.
Crypto is touted by enthusiasts for its ability to be trustless and conduct transactions without intermediaries. Some may see this as more encroachment of traditional finance in crypto. But others could see this as an inevitable maturing of the industry.
That’s what’s different about Plaid’s expansion into crypto wallets. The company is not simply connecting consumers’ accounts at established banks with new fintech apps to transfer data. Instead Plaid is connecting relatively new technologies, which may have numerous risks involved.
Plaid is looking to move further into crypto, especially with its identity verification products for traditional finance. These include a new behavioral analytics tool that can predict whether you are entering your own social security number or a fraudulent one based on the way you put it into a form. Another autofill tool can use a person’s phone number and date of birth to verify identity.
The company is also working on a way of verifying identity without sending data to an app, a feature that may appeal to more privacy-conscious crypto users. For example, if a product is age-restricted to 18- or 21-year-olds, Plaid could just pass on that verification without sharing a user’s birth date.
Since Plaid sits at the middle of a range of this data, this type of identity tool is a logical next step. As it gets further into crypto, though, it may find a challenge persuading the more hardcore blockchain developers and savvy customers that trusted is better than trustless.
