Plaid's Strategic Shift: Building Value-Added Services for the Future of Open Banking
PLUS: Google-acquired founder building something new
Behind The Scenes
Since its Series D funding, Plaid has been heavily investing in expanding its offerings beyond its core data aggregation capabilities. This strategic shift includes:
Identity verification and fraud management, bolstered by the acquisition of Cognito for $250 million in 2021.
Payments facilitation, including risk-scoring solutions for faster ACH payments and multi-rail payment services focused on real-time payments.
Credit decisioning, leveraging cash flow data derived from Plaid's data aggregation capabilities, often in collaboration with regulators and non-profits.
This shift in strategy marks a departure from Plaid's previous focus on owning as much of the data coverage and connectivity layer as possible. The company has shown a willingness to prioritize building out its value-added services, even partnering with others in the payroll space.
This strategic move is well-timed, as the Consumer Financial Protection Bureau (CFPB) is set to introduce rules on open banking in the U.S. via Dodd-Frank Section 1033. These rules will require financial institutions to set up secure methods for sharing consumer data, with the aim of encouraging competition at an infrastructure level and preventing monopolization by a few firms.
Plaid's proactive approach to building value-added services positions the company well for the upcoming changes in the open banking landscape. By ramping down R&D investment and returning to profitability in 2024, Plaid may be preparing for a potential IPO as the window for public offerings appears to be opening again. This strategic shift demonstrates Plaid's foresight and adaptability in the rapidly evolving fintech industry.
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