Plaid Business Model and SWOT Analysis – How Does Plaid Make Money

 

Overview

Plaid is a Fintech company headquartered in San Francisco, California, United States. It was founded in 2013 by William Hockey and Zachary Perret.

The platform is embedded with Application Programming Interface (API) technology, providing an advanced digital platform that connects customers’ bank accounts to other financial applications.

Company Profile

Company NamePlaid Inc.
Websitehttps://plaid.com/
Founded2013
FoundersWilliam Hockey, Zachary Perret
Key PeopleZachary Perret – CEO, Helen Min – Head of Marketing, Jean-Denis Greze – Chief Technology Officer, Pouya Fatemi – Head of Business Operations & Finance, Paul Williamson – Head of Sales, Eric Sager – COO, Luke Miner – Head of Data Science, Jeroen Mols – Android Developer
HeadquarterSan Francisco, California, United States
Company RevenueUS$200 million (2019)
Key CompetitorsAkoya, Finicity, SynapseFI, MX, ndgit

What is Plaid? A Brief History

Plaid assists stakeholders by creating fintech solutions that is secure, convenient, and trustworthy for customers to links their bank account to various financial applications and services.

Using sophisticated technology allows users to verify account ownership, perform cutting-edge financial transactions, and minimize risks through a handy method.

Within five rounds of venture capital funding, the company so far has gathered roughly $734.3 million in total from many prominent investors.

As reported by Forbes, it has gained revenue of approximately $170M as of 2020. For the time being, the whole entity has skyrocketed to be one of the top-tier fintech corporations globally, worth $13.4 billion market valuation after the latest Series D funding round in April 2021.

How Does Plaid Work And What Does it Offer?

This digital financial platform lets users transact money in an abundant format via wide-ranging applications once connecting with users’ bank accounts.

The issue is that each banking institution has its intricate system that requires app developers to establish connections to every partner. However, this platform is equipped with API for app developers to integrate with most banks that employ the same application easily. 

With consent, this financial firm requests customer some personal information such as their names, account number, account type and balance for the operation purpose.

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Aside from that, the app processes all these records in a highly secure data protection system deploying endwise encryption techniques before conjoining with related parties. The users, as a result, can rely on the firm’s offerings with trust and confidence.

Meanwhile, the initial setups are quick and easy; the only critical task is to choose potential institutions they plan to link with. After that, they can complete login information on behalf of the selected organization when activating the app.

Nowadays, the firm has incorporated with more than 11,500 financial multinationals throughout North America and Europe.

Plaid Business Model

Plaid business model is freemium, and it generates income from the fee of bridging customers’ bank account with numerous establishments and other comprehensive provisions in the financial field.

As an innovative fintech enterprise, it aims at facilitating and securing the connections of users’ bank accounts to any associated decks. Once applying the login credentials, its prevailing application will encrypt all users’ personal information before performing all sorts of monetary transactions.

Plaid Unique Selling Propositions

Fintech and banks will continue to battle one another to win the market share. No wonder this is a valid opportunity for customers to benefit from the competition of counterparties as they are trying to create a more advantageous outlook for financial infrastructure.

Ultimately, fintech and banks are keen on developing their business concept and offering further innovative products in the market.

Even though the aggregation of data, access to information, and analytics tools in Plaid’s concept have been around for some time, this corporation is distinctive for its enormous data management that can interpret and target customers fluently.

That being the case, its tools and services are greatly viewed as effective, straightforward, and intelligent, considering they are a real revolutionary for everyone in the monetary field.

On the other hand, users can make most of the licensed data flow provided in the app meaningful once analyzing and strategizing properly. Their continuous productions are much simpler and safer for all users–from individuals or startups to large-scale organizations to operate their work seamlessly.

How Does Plaid Make Money?

Plaid makes money by charging service fees from users once registering with the app to access desirable items and amenities.

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Since the platform adopts the freemium concept, the basic services are available for free, while more vital features come at a cost.

The truth is subscription fees apply to all supported transactions (e.g. paying bills). However, customers who opt for paid services are charged at different prices according to their select product.

Besides, the platform provides a one-off fee option once a brand-new user account is linked to the API. In addition, the organizations must pay every time they use the API to search for the information on a user’s account.

Plaid SWOT Analysis

Strengths

Demonstrated by the real-time figure of customers and business partners, it’s obvious that this firm has gained lots of trust from startups and giant institutions.

To understand its current strength and size, let’s deep dive into the policy and regulations that trigger the firm’s expansion and the possibility of its future product design.

  • Supportive Regulation

This fintech’s competitive advantage is derived from its position as the gate-opener in an incoherent banking system. While banks have the upper hand in size, fintech better consider their customers’ demands, like controlling and choosing their personal data.

The business’s existence was born after the founders encountered difficulties while developing a financial app for consumers. Under the restricted banking system in the US, many banks hold an incomplete approach to a hands-on technology that allows the apps to access the users’ information.

  • Sound Security

The enterprise has built a reliable source, enforcing access controls, regular investigations, and information encryption that ensure the user’s authentic ownership. There’s almost no error in their platform security.

  • Abundant Portfolio

Although the organization has been heavily concentrating on payments and banking, it incorporated the Quovo tech to collect data from different instruments such as trading, mortgages, and student loans which could expand its capability to grasp the lending and investment portfolio shortly.

  • Exceptional Business model

One of the venture’s fundamental strengths is its ability to adapt to new and innovative applications. After earlier success with payments, the entity has enlarged its contribution to encompass the competitors and expand the market share by providing various new products, focusing on accessibility and data aggregation tools to assist the business.

Weaknesses

Despite the greatness, it’s undeniable that the corporation has flaws that users should be alerted as follow:

  • The app can get interrupted for users to access, transfer and perform the transactions due to the lack smooth internet connection and stable server.
  • Financial technology knowledge among the people is still limited due to unequal information in different areas, especially the gap between urban and rural. This means clients have inadequate opportunities to find company alternatives to rely on, such as Plaid.
  • This imperfection builds a barrier for clients from executing virtual transactions. Therefore, financial services might not be reaching its full potential. It resonates the company requires more socialization to promote the importance and reliance of their safe digital financial transactions for users.
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Opportunities

Plaid has signed many collaborated agreements with US banks in the past few years, granting them exclusive access to their database.

The establishment has linked hundreds of app to numerous gigantic financial enterprises in less than a decade. Began as a casual digital program. With the API implementation, the company has become a powerful financial platform, providing developers tools to facilitate the transfer of information from the bank to applications.

In a field that is always evolving, the company standouts the crowd by assisting in developing a modern core financial system. As a major player in the fintech industry, the company will continue to grow by producing more digital products that benefit all business partners.

Threats

No matter how secure the financial planform is, the rise of cybercrimes among service providers is still remarkable because the number of disastrous cases caused by hackers is upswing everywhere. This major risk surely drives people skepticism to fewer online transactions.

While technology pushes evolving markets, it will bring new opportunities and threats at the same time. The issues are yet to be identified by companies, shareholders, regulators, and clients. However, the firms need to be ready for whatever unfavourable occurrence emerging from their parties, and here are some primary threats that appear frequently:

  • Cybercrime And Vulnerability Of Technology:

Financial technology is so advanced that it can be a complex procedure for many users. The unfamiliarity might lead to the threat of loss from cybercrime caused by either technology or relevant parties.

If the fintech ecosystems are susceptible to these external risks, it may expose consumers to greater harm and risk such as fraud from third-party sources.

Developers need to tackle the issues by utilizing user-friendly product design, reliable technology, high risks management, secure protection, and competent operators.

  • Misleading Algorithm Produces Biased Consequences:

In a highly automated financial business platform, an algorithm for a systematized informed decision is imperative. Nevertheless, some misleading algorithms could lead to biased, unfair, and adverse results. This is why market participants need appropriate experiments, testing, and scoring algorism to safeguard the attended threats. 

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