What Does Plaid Do That Venmo, Robinhood, and Coinbase All Need?
Whether transferring money on Venmo, buying cryptocurrency on Coinbase, investing in stocks with Robinhood, or handling student loans through SoFi, there is a tech company in the U.S. that many Americans are unfamiliar with, yet it has silently become a crucial channel bridging users with centralized financial exchanges. This company is called Plaid. Recently, Plaid CEO Zach Perret spoke with New York Next financial reporter Lizdia Moynihan about how Plaid has become the digital pipeline behind financial applications like Venmo and Robinhood. Zach Perret stated that Plaid’s goal is to achieve financial democratization, and he is investing significant time in Washington D.C. to persuade lawmakers to prioritize the importance of user data privacy and security.
What is Plaid?
Zach Perret, co-founder and CEO of Plaid, describes the company as a translator and messenger between banks and financial applications. In simple terms, Plaid serves as a bridge between banks and apps. When users connect their bank accounts within an app, Plaid is responsible for establishing that connection behind the scenes, allowing the bank and exchange to communicate in a way they both understand. Plaid enables users to securely link their bank accounts to popular financial applications such as Venmo, Robinhood, SoFi, Mint, and Coinbase.
The seemingly simple action of “connecting” actually involves a high technical threshold. Different banking systems have varying standards and protocols, and third-party applications need to access data in real-time and securely, from account balances and transaction histories to payment instructions. This requires a highly stable and regulatory-compliant data infrastructure, and Plaid is the builder of this digital highway.
Originating from Budgeting Apps, but Falling into the “Connection” Application
Zach recalls that the initial intention of starting the company was to create a tool for consumers to budget their finances and help the public understand cash flow to make informed decisions. However, they quickly discovered that the key problem was the lack of a stable and simple way for apps to “communicate” with bank accounts. This prompted them to shift their focus from applications to building the infrastructure for connections, which is now Plaid.
The Financial Industry is Not Ready for Digitalization; Plaid Fills the Gap
Zach points out that banks and the financial industry were designed in an era without the internet. In the past, any banking transaction required a visit to a branch to speak with someone, which might be convenient for urban residents but extremely unfriendly for those in rural areas. Plaid’s vision is to create an open, digital financial infrastructure that allows consumers to use their financial accounts online freely and securely. Whether for payments, loans, investments, or budgeting, Plaid aims to streamline the underlying data pathways, allowing fintech apps to confidently build on Plaid’s infrastructure.
Ensuring Transaction Security and Protecting User Privacy to Prevent Fraud
Zach states that Plaid is a company that handles sensitive financial data. Security and privacy are undoubtedly among Plaid’s core values—freedom comes from trust, and trust comes from understanding the system. In addition to adhering to the industry’s strictest security standards, Plaid actively develops notification and authorization mechanisms. For example, after consumers link their accounts, Plaid proactively sends notifications to confirm actions, allowing users to monitor data usage and prevent financial fraud.
Ongoing Communication with Washington D.C.
To ensure that Plaid’s infrastructure can continue to operate within a legal and policy framework, the company opted to establish a team in Washington D.C. early on to build stable relationships with lawmakers and policymakers. The Plaid team explains the importance of financial data and consumer privacy protection to officials in D.C., hoping to promote a healthier environment that ensures innovation can coexist with security.
The Advent of the AI Era; Plaid is Also Reshaping Its Position
Although Plaid is not originally an AI company, it is rapidly transforming under the AI wave. Zach indicates that the company has set clear internal goals; while Plaid may not be AI-native, it aims to become AI-first. This transition encompasses not just technology development but also customer service and process design, which are beginning to incorporate AI. The company originally had a dedicated AI team, but as the demand for AI has grown, they announced that AI skills must be a prerequisite for every engineer.
Company Profile of Plaid
Year Founded: 2013
Headquarters: San Francisco, USA
Service Scope: Supports connections to over 12,000 banks and applications
Notable Partners: Venmo, Robinhood, SoFi, Coinbase, Acorns, etc.
Core Products: Financial Data API, Authentication, Transaction Access, Consumer Authorization Notifications, etc.
Risk Warning
Investing in cryptocurrency carries a high level of risk; prices can be highly volatile, and you may lose your entire principal investment. Please assess risks carefully.
