November 19, 2020
Plaid’s strategy to facilitate an API-based ecosystem
Ginger Baker & Niko Karvounis
Reliable, secure access to consumer-permissioned data is the heartbeat of fintech. It’s what allows fintech services to help consumers save money, save time and reduce their financial stress. As a network that provides the financial account connections between consumers and fintech apps, we are constantly thinking about how to make connectivity better, more reliable, and more expansive.
When Plaid launched in 2013, few banks in the United States had external APIs that allowed people to permission their data to third party apps. Over time, Plaid grew from covering a handful of banks to nearly the entire US banking market, including 5,000+ FDIC insured banks, 4,000+ NCUA insured credit unions, and thousands of other brokerages, neobanks, and other financial service providers.
Today, fintech use has accelerated–and requires stronger collaboration across the ecosystem to support consumer connectivity needs and enable innovation in the future. To accomplish this, we are accelerating across a three-pronged approach with the goal to dedicate 75% of our traffic to APIs by the end of 2021.
Migrating to APIs: Accelerating agreements with large financial institutions
As the use of fintech increased, we engaged some of the largest financial service providers who also sought to empower consumers with access to and control over their financial information. Across the industry, there is agreement that an API-based ecosystem will deliver the reliability needed to meet rapid consumer adoption of fintech. We’ve partnered with large financial institutions on that journey by signing and announcing agreements, and collaborating on ways to provide reliable, long-term connectivity for consumers. In 2021, we expect to finalize more data access agreements with top financial institutions, while working closely with our developer community to transition seamlessly to this new, API-based ecosystem.
Plaid Exchange: Enabling an open finance future for all financial institutions
Financial institutions understand the value in empowering their customers with reliable integrations, but some don’t have the internal resources to build out their own APIs. To help, we created Plaid Exchange to make it easy and cost-effective to plug into the Plaid network. Importantly, the Plaid Exchange API platform gives institutions the ability to more effectively empower their customers with transparency and control over where and how their financial information is shared. A diverse cohort of institutions are live or in the process of integrating - including large traditional banks, major neobanks, regional banks and credit unions.
Industry partnership: Creating an operating framework for digital finance
In addition to enabling API-based access for as many consumers as possible through our integration strategy, Plaid is active in industry conversations to develop an approach for Open Finance around the world. In the US, we are on the board of FDX, and are actively involved in ensuring that APIs protect the data and reliability our customers need, as well as the security, transparency, and anti-fraud features needed for sustainable growth. We also engage with the Consumer Financial Protection Bureau to inform a new kind of consumer-oriented financial system that works for everyone. Globally we engage with policymakers like Finance Canada, Financial Conduct Authority, DGFISMA and others, to bridge the gap between current Open Banking regulation and the future of Open Finance. In all of these conversations, we represent the future of fintech and work closely with all relevant parties to architect the next generation of financial services.
Plaid was built on turning disparate, complex financial data into a single, seamless platform that is easy to access and powers innovation. An API-based ecosystem will deliver the reliability needed to meet rapid consumer adoption of fintech, and accelerate an Open Finance future. We believe an API-led ecosystem is good for fintech, consumers, and financial institutions who want to embrace a fully digital ecosystem. This change is exciting, and though we will move quickly, we are also committed to reliability and performance in these APIs as we move forward, together. We hope all of you will join us on that journey as we head into 2021.