Earlier this year, cooperation was announced Checkered and Bank of the United States, which was intended to take advantage of Plaid API-based financial infrastructure in the development of the new cross Chassis Incorporation This would increase transparency and simplicity for corporate customers who interact with third-party finance applications. This integration, accessed through US Bank My Controls and Plaid Portals (currently in beta), emphasizes a shared commitment to open banking and is moving towards unidentified application ecosystems that ensure secure access to third-party banking services.
The U.S. Bank is the fifth largest financial institution in the United States and has been around for over a hundred years. With this history comes a wealth of experience in Financial Services and a huge membership that covers the entire country. In addition, prior to working with Plaid, US Bank had already begun construction of the API platform Developer portal which enabled integration into the company’s Financial Services. While this integration infrastructure existed, it was largely hidden from the eyes of U.S. bank customers.
Plaid, on the other hand, was established in 2013 with the aim of leveraging APIs to provide financial information to banking customers in a transparent manner and to facilitate access to third-party integrations. This would prove to be a large order, as many financial institutions at that time were still operating in a world dominated by paper processes.
Plaid initially had to take advantage of a combination of techniques, including Screen scraping information (we’ll talk about this later) to make planned workflows possible. Over time, banks began to understand the pace of the API economy, and Plaid announced in late 2020 that it will be able to use 75% of its traffic for APIs by the end of 2021. Part of the promise fulfillment process is to continue to integrate with large financial institutions, such as U.S. banks, which not only handle a large number of transactions but also share commitment to APIs as part of unlocking the potential of open banking.
To help readers understand how APIs underpin performance-based partnership strategies (compared to the more open developer business model), ProgrammableWeb discussed with Plaid representatives to learn more about this collaboration and how it achieved the two companies ’common goals for open banking and what it means to prioritize customer integration. is intended to remain mostly invisible. In the API ecosystem-based business model system, ProgrammableWeb has comprehensively documented us A guide to modern API business models, The Plaid business model belongs to the ecosystem subclass of the hybrid business model.
Dan Kahn, Plaid’s chief global finance officer, told us that:
“Plaid came to the scene in 2013 and” Fintech“was relatively unprecedented – many financial services were paper processes. So many banks looked at the huge role of digitizing their products and services, but getting their customers to seamlessly connect their accounts to applications digitally was not at the top of the list for many. A few years ago some banks started building more mature Chase and Wells Fargo) were nowhere near where they are today. As consumer confidence in digital financial instruments has increased, banks are prioritizing building their APIs to support connections without having to use Plaid to scratch the screen. “
Khan further explained Plaid’s unique value proposition, stating that:
“One reason for Plaid’s existence is to reduce complexity. There are more than 5,000 FDIC-insured banks in the United States. There are more than 4,000 credit unions. There are hundreds if not thousands of other institutions such as intermediaries and new banks. And for the average consumer who just wants to link their account to Venmo, send money internationally using TransferWise or track their finances using an app like YNAB (You Need A Budget). They really don’t care about background technology. “
This argument certainly applies to customers of a U.S. bank. Without a sleek solution for U.S. bank customers for third-party integrations, such as YNAB, much of the bank ‘s integration infrastructure has been underused. The U.S. bank found a partner in Plaid with a similar mindset and a unique value proposition geared towards open banking.
“Plaid attaches importance to transparency, user control and security. And so the most important thing with the US Bank was that we were 100% in line with these principles. And so starting from those principles, we didn’t say what the US Bank has off the shelf? What does Plaid have on the shelf? “
For this collaboration to be successful, Kahn noted that both companies had to think outside the existing infrastructure and design an API that was new to both companies and dedicated to solving certain customer problems. The U.S. lacks a common standard for such connections, and while both Plaid and U.S. Bank are members Exchange of financial data (FDX), a non – profit organization committed to uniting industry according to common standards, this partnership preceded the formal creation of an agreed solution.
“So we said, okay, let’s put our heads together. Which would be really good User experience so that customers who are already using applications as we move to this new API do not have to disconnect, but can be notified that this change has taken place technically in the background.
All of this has to do with Kahn’s original statement; customers don’t want to be full of everyday details about technical changes, they just want to know how they can get things done. Instead of worrying about technical issues, both companies were able to email bank customers with a notification of new opportunities. Khan presented the benefits of this integrated ecosystem:
“So if you’re a consumer, you have multiple places you can visit to see where your information is shared and track it. And if you want to withdraw your consent, you can do so on both properties and it will be updated in real time.”
A separate Plaid representative provided a value for a specific use case:
“For example, if a company had linked an Expensify account and their company no longer uses Expensify to track expenses, of course they no longer need to link their account to Expensify. So they can just unlink it from the Plaid portal. And then the US bank has a portal go in and see where their apps are connected via Plaid, and they can manage those connections, and everything is synced and reflected in those places. ”
In addition, Khan states that in addition to benefiting the end user by simplifying the management of financial connections, Khan states that the transition to API connections includes security benefits.
“If a bank (like a US Bank) has an API that allows us to integrate the connection between a consumer’s bank account and the app they want to use, it eliminates the need for screening. Scratching the screen requires a connection between the consumer bank account and the application to keep the login information secure. The more banks build APIs, the faster we can move to a system without credentials. “
This is an important change to note. If you think about the earlier discussion about the beginnings of Plaid, you will remember that when a company was just starting out, it often had to resort to scratching the screen to access information from financial institutions that were just starting to digitize their business. Scratching the screen at the time served as a necessary evil that is increasingly moving into the past. As Plaid discusses the transition to a more secure, unauthorized system, this transition away from screen scraping and to APIs as the only point of contact for financial information is at the heart of this movement.
Plaid has made some progress in facilitating this transition in the financial sector and has noted that the company now operates in one way or another with an increasing number of financial institutions:
“We are now actively working with this type of partnership, more than half of the top ten banks. And then there are, in fact, more than 400 financial institutions committed to interfaces. ”
This speaks to a huge change in the landscape where Plaid once discovered that few banks were on their way to using APIs to share data. Now the company is working with hundreds of institutions to develop specific financial interfaces. This also highlights Plaid’s two-step business strategy. First, the company works directly with some of the larger financial institutions on customized API offerings that better meet their needs. This is clearly reflected in the cooperation with the US Bank. Then, for partners who may not be ready for this level of engagement, the company offers a Plaid Exchange service that gives developers access to ready-made tools to create simpler integrations.
Khan explained this offer, stating that:
“And then our Plaid Exchange API is an opt-in API. So if you’re newer, like a new bank, you don’t have that many customers … Plaid may not have the integration we’ve built for you. The market may not have demanded it yet, but we actually see some of these words from fintech that this is actually part of our minimum performance when we launch, because if you can’t use an account to connect to Venmo, Square and YNAB, it’s not a fully functional account. “
Since Plaid’s first interviews, the company has announced a new partnership with Capital One that will further strengthen the company’s unauthorized approach to financial integration. In addition, while Plaid Portal is still in beta (the expected full release is later this year), developers can check out the product at my.plaid.com.