Fintech

Plaid is striking back after Stripe entered its core business

Onboarding customers through identity verification and ACH transfers is a hot sector in fintech, and the two fast-growing fintechs are set to battle it out.

Plaid's Alain Meier and Jean-Denis Greze

Plaid is looking to help banks and fintech companies with anything related to the onboarding of a customer onto a financial product, said Plaid CTO Jean-Denis Greze.

Photo: Plaid

Plaid is moving into identity verification in a crucial expansion beyond its roots connecting banks and fintechs — a move that could put it in more direct competition with Stripe, another company known for its financial software tools.

In conjunction with its Plaid Forum customer conference this week, the company is also announcing two products focused on ACH transfers as it moves into payments.

Plaid, which has been expanding since a planned takeover by Visa fell apart last year over antitrust concerns and was recently valued at $13.4 billion, is feeling some competitive heat, and applying its own.

Stripe, which last raised money in 2021 at a $95 billion valuation, recently announced an API product to connect to banks — Plaid’s original core product. That caused a Twitter tizzy as Plaid CEO Zach Perret briefly accused Stripe of snooping for competitive intelligence, a charge he withdrew. Stripe also has its own identity-verification product as well as ACH transfer tools.

Still, while they compete for customers on some products, Stripe and Plaid are not necessarily on a collision course, said Ryan Falvey, managing partner at seed stage firm Financial Venture Studio.

Falvey noted Stripe’s customer funnel is those accepting payments, especially startups or small or medium-sized businesses, while Plaid has more of an enterprise offering targeting fintechs and banks: “There are very different core segments they’re going after.”

Plaid is looking to help banks and fintech companies with anything related to the onboarding of a customer onto a financial product, said Plaid CTO Jean-Denis Greze. Identity verification is a big part of that.

Image: Plaid

With Plaid Identity Verification, part of the company’s acquisition of Cognito, consumers can enter their information, take a selfie and have Plaid do an identity check. It can recognize pictures of screens, printed paper and tampered ID cards and also does document verification, risk analysis and anti-money-laundering screening. Customers using it include Republic, Wyre, Gemini and FTX.

The goal is to make linking accounts and identity verification seamless, Greze said. “What we've heard time and time again from our customers is that they would love for us to start tackling other parts of the onboarding flow that ... introduce a lot of friction for end users,” said Greze.

Previously, fintech companies or banks using Plaid had to use a separate vendor for identity verification — and often multiple ones for different systems and different geographies, said Alain Meier, head of Identity at Plaid and the former CEO of Cognito.

Plaid does one check and can recognize more than 16,000 document types and in more than 200 geographies. The product can request more or less information from the consumer depending on the company’s preference, risk factors or location.

Currently these checks are being done on a per-company basis, every time a consumer signs up with a bank or fintech. Plaid has a consumer-facing portal it recently launched so people can see which of their various accounts are linked. Adding an identity verification service that could be used across companies would make sense. Greze said Plaid didn’t have anything to announce on that front.

Plaid is also announcing an ACH risk product, Signal, that looks at 1,000 factors including proprietary data such as Plaid connection history, account usage, past ACH use and identity change history. Then it gives a risk score for companies to decide whether the cash will actually transfer. This makes it possible for companies to give access to cash before the three-to-five days that it typically takes for ACH transfers to go through.

Plaid has seen a reduction of NSF return fees and fraud by about half among customers beta testing the product since last fall, Greze said. That has meant faster access to funds for consumers, he said. A related product uses Signal to guarantee ACH transactions.

Making ACH easier is important because bank accounts and fintech services need funds to be useful, Greze said: “If you think about it, for a lot of fintech, the critical point before you have a happy user is to fund the account, right?”

But it also brings Plaid more into the realm of payments. While Plaid is not a payments company, ACH is an alternative to other forms of payment such as credit cards.

The growing competition, Greze said, is a result of “following our customers … account linking is going to be more and more of a core experience out of everything that people do with money online, right?”

Both Plaid and Stripe, as large, private fintech companies, want to develop their story for Wall Street, Falvey said, which includes more recurring revenue products. That’s why they’re both expanding their products in ways that overlap.

Investors like SaaS-type products that are less subject to dips in volume than transactional sources, Falvey said. Both Plaid and Stripe have to prove that they can generate steady, growing revenue to match their sky-high valuations. That’s ultimately what they’re competing with.

Entertainment

A game that lets you battle Arya Stark and LeBron James? OK!

Don’t know what to do this weekend? We’ve got you covered.

Image: Toho; Warner Bros. Games; Bloomberg

This week we’re jumping into an overnight, free-to-play brawler; one of the best Japanese dubs we’ve heard in a while; and a look inside a fringe subculture of anarchists.

Keep Reading Show less
Nick Statt

Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at nstatt@protocol.com.

Sponsored Content

They created Digital People. Now, they’ve made celebrities available as Digital Twins

Protocol talks to Soul Machines’ CEO about the power of AI in the metaverse


Keep Reading Show less
David Silverberg
David Silverberg is a Toronto-based freelance journalist, editor and writing coach. He writes for The Washington Post, BBC News, Business Insider, The Toronto Star, New Scientist, Fodor's, and several alumni magazines. He also writes for brands such as 23andme, Shopify and Bold Commerce. He has served as editor of B2B News Network, Canada's only B2B news magazine, and Digital Journal, a leading pioneer in citizen journalism. Find more about him at www.davidsilverberg.ca
Climate

Window heat pumps could revolutionize home climate tech

Window heat pumps aren't just good for the climate. They could begin to remedy long-standing environmental injustices.

When Hurricane Ida swept through New York City last August, the storm damaged multiple boilers at Woodside Houses in Queens. Repairs were slow, and residents were forced to live with heat outages well into the winter; some even relied on their apartments’ gas stoves to keep warm.

That was hardly the only time residents in New York’s vast public housing system were subjected to too-cold or too-hot homes. For them, it’s a near-daily facet of life.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).

Policy

The three words driving the crypto policy debate

The industry’s criticism of “regulation by enforcement” has a long history — and hides some complicated realities.

Photo: Al Drago/Bloomberg via Getty Images

If you're following the debate about how crypto should be governed, you've heard the phrase “regulation by enforcement.”

The latest flashpoint comes in the form of the Securities and Exchange Commission's civil lawsuit alleging insider trading by a Coinbase employee. The SEC’s explosive assertion that nine of the 25 cryptocurrencies involved in the alleged insider scheme are securities could have significant consequences for the industry. Placing that claim within the lawsuit has prompted Coinbase, a high-ranking U.S. senator and even fellow federal regulators to bemoan that the SEC is regulating by enforcement.

Keep Reading Show less
Ryan Deffenbaugh
Ryan Deffenbaugh is a reporter at Protocol focused on fintech. Before joining Protocol, he reported on New York's technology industry for Crain's New York Business. He is based in New York and can be reached at rdeffenbaugh@protocol.com.
Workplace

When your revenue falters, don’t blame the worker

Tech leaders want to boost employee productivity. Here’s how to have that conversation without alienating workers.

The idea that underperforming individuals are solely responsible for their companies’ large-scale financial troubles is probably inaccurate.

Photo: fotostorm/E+/Getty Images

It’s easy to overlook declining productivity when a company is doing well. But with the looming threat of recession, some big tech leaders are suddenly getting tough on workers. At Meta, Mark Zuckerberg wants to “turn the heat up” because apparently there are some Metamates who shouldn’t be there. The situation is similar at Google, where Sundar Pichai said employees need to work with “greater urgency, sharper focus, and more hunger than we’ve shown on sunnier days.”

The “we need to boost productivity” discussion is a better alternative to layoffs or hiring freezes, but that conversation needs to be handled delicately. Vaguely gesturing to the need to buckle down can be at best unhelpful and at worst stressful to the point of losing all focus.

Keep Reading Show less
Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at llawrence@protocol.com.

Latest Stories
Bulletins