Plaid is a company in the financial technology, or more commonly known as the “fintech” space, which was founded in 2013, pivoted sometime in 2014 and was purchased by Visa in January 2020 for $5.3 billion dollars.
Plaid was founded by two entrepreneurs who set out to develop a consumer app in the budgeting and account reconciliation field. A mobile or app-based version of Quicken or Intuits Quick Books where users could provide their credit cards and bank account and the interface would allow them to get some insights into their spending habits and create budgets and reports to better manage their personal finances. The startup entered and won a prestigious grand prize award during a TechCrunch Disrupt hackathon in New York in 2013 with their application which at that time was called “Rambler”. During the development process the founders recognized that one of the biggest challenges to building “Rambler” was the bank connectivity component – it was time consuming and resource intensive to develop a solution which connected to each financial institution. The duo wanted their application to connect to the majority of US banks and this required writing code which would need to securely connect and consume the banks exposed API’s for retrieving account information, transaction reports and transaction details. This development exercise was required for each new financial institution the company wanted to include in their app.
During this development process the founders recognized that this was a major challenge not just for their application but in the industry in general and decided to pivot their company and focus on this area of opportunity, and Plaid was born. Plaid was a middleware platform which allowed developers to quickly and easily connect to over 190 different financial institutions through a simple, single and unified platform. The platform allows developers access to financial transactions, balance enquiries, investments, assets, liabilities and the income of its users. I believe a solution like this is not only innovative in itself, but that it’s enabling other innovative solutions to be developed in a variety of spaces and industries. A prime example would be Venmo – which uses Plaid to perform its social instantaneous monetary transactions between over 40 million of their users. Acorns, Robinhood, Coinbase, Upstart, Ellie Mae and Betterment are just a few of the applications which are using the underlying services of Plaid to enable innovative solutions for their own customer base.
Lastly, while the company and their business case are innovative, I also believe the business model is an innovative story which should not be overlooked. In the traditional business scenario suppliers or “Value Add” type of companies are very common. But this type of scenario in the technology or digital world is a unique position to be in. Plaid does not need to source, market or sell their product to end users nor do they need to interact with their end users. Plaid markets their products to developers and forms relationships with the financial service providers. Both would be considered one-time events and their efforts and work can be scaled infinitely. Plaid is in a unique position in that they are a Business to Business “B2B” firm, but benefit from the growth, size and mass of a Business to Consumer “B2C” company.