The big open-banking provider Plaid Inc. on Thursday launched a major international campaign to support so-called account-based payments, working in league with almost 50 fintech companies and service providers in North America and Europe. The partners include long-time Plaid allies Dwolla Inc. and Square Inc., as well as new connections with Checkout.com Ltd., Currencycloud Ltd., and Marqeta Inc.
The move comes in recognition of the rapidly increasing flow of money into fintech accounts and digital wallets. Last year, for the first time, transactions by digital wallets exceeded those by cash for the first time, while the number of digital-wallet users is expected to hit 4.4 billion by 2025, up from 2.6 billion last year, according to numbers cited by San Francisco-based Plaid, which cited global figures. “As more funds flow online and people adopt more digital-finance apps and services, account-based payments are at the center of this transition,” notes Paul Willamson, head of revenue and partnerships at Plaid, in a blog post announcing the new initiative.
Open-banking companies such as Plaid specialize in using application programming interfaces to link consumers’ bank accounts to fintech providers to verify account ownership and the sum held in the account. The method enables easier and faster transfers to fintech accounts held by the consumer. It also replaces an older online verification technique that relies on so-called screen scraping, or the copying of of such data as account numbers. Plaid says it has links to accounts at some 11,000 financial institutions and to more than 5,000 apps.
With the new initiative, Plaid will stand at the center of a network to enable movement of money into fintech accounts held by consumers or businesses as well as from those accounts to various service providers, according to a spokesperson for Plaid. In the U.S. market, payments from fintech accounts to service providers would flow through the automated clearing house network or via The Clearing House Payments Co.’s real-time payments system, the spokesperson says. “In the U.K. and Europe, Plaid moves the money over Open Banking rails per the regulations in market,” she adds.
The prospect of open-banking systems ultimately competing for volume with the established global card networks has led to several major corporate deals. Visa Inc. last year offered to acquire Plaid for $5.3 billion. Visa ultimately abandoned the deal in the face of objections from the U.S. Department of Justice on antitrust grounds. In June, Visa agreed to pay $2.15 billion to buy Tink AB, Stockholm-based open-banking network with connections to 3,400 financial institutins throughout Europe.