Fintech Firm Plaid Raises $44 Million
June 19 2016 - 8:50PM
Dow Jones News
Plaid Technologies Inc., whose software allows a variety of
financial-technology startups to access their customers' bank
account information, has raised $44 million in a new round led by a
fund at Goldman Sachs Group Inc.
The new funding is a boost for apps and websites that use Plaid,
which has now raised about $60 million total, as they work to
ensure access to customer data held by banks.
In recent months, banks and fintech firms have clashed about
some of the ways that the firms access bank-customer account data,
including concerns about security of passwords and surges of data
traffic to banks' websites.
Many upstart financial-services providers such as online
financial adviser Betterment Inc. use Plaid's software to access or
check customers' account data when providing mobile and web
services like budgeting, investing or lending.
Zach Perret, co-founder of Plaid, said that the past six months
have seen "increasing cooperation" between banks and fintech firms,
though so far that hasn't led to a resolution. "There's an active
discussion in the industry, and we think consumers should have
access to their data, and should be able to utilize it when and
where they need it," he said.
Industry discussions include potential agreements about how and
when data aggregators can access customer information, and through
what means. Part of the discussion is about making it clear what
data customers want to share, and about how customer account
passwords should be stored.
Last year, banks including J.P. Morgan Chase & Co. briefly
restricted access from a service by Mint, a unit of Intuit Inc.
that allows customers to gather all their financial accounts on one
site, after the banks said it was overwhelming their websites with
data traffic, the Journal has previously reported. A spokeswoman
for Intuit declined to comment.
That incident prompted a wave of discussion among fintech firms,
banks and regulators. Fintech upstarts, which often offer services
that compete with banks, have said that bank data should be free
for customers to share. Banks have said that they only want to make
sure customer data are secure and that their servers aren't
overwhelmed.
"Handing over your password to your bank account just isn't a
good idea," said a J.P. Morgan spokeswoman. "We're working with the
industry to make a secure and private way for our customers to
access these services."
Plaid wasn't involved in the Mint incident, but the company
wants to make sure that it can continue to have access to bank
data.
Mr. Perret said he had met with regulators and bankers recently,
including at the recent fintech summit at the White House, to
discuss data-sharing arrangements. "Our fundraising is an
endorsement of the work we have been doing," he said.
Christopher Dawe, co-head of the venture-capital and
growth-equity team at Goldman Sachs Investment Partners, said those
discussions were a key factor in its investment in Plaid.
"It's ultimately in the banks' best interest to better serve
their customers with data access, reduced friction and financial
innovation," said Mr. Dawe.
The fund invests on behalf of Goldman's wealth-management
clients, and has invested over $6 billion into private companies
such as ride-sharing service Uber Technologies Inc. and
music-streaming site Spotify Inc.
Plaid, founded in 2012, has raised money from Goldman, New
Enterprise Associates Inc., Spark Capital and other venture
investors. The new round could also include strategic investors,
the company said.
Plaid competes to varying degrees with data-linkage services
from financial software firms including Envestnet Inc.'s Yodlee and
Morningstar Inc. Its customers and partners include PayPal Holdings
Inc.'s Venmo payments unit, Stripe Inc. and services that provide
mobile banking and budgeting services.
Jon Stein, chief executive at Betterment, said his firm uses
Plaid to verify that customers have the money in their bank
accounts when they transfer funds. Betterment also providers
customers with a view of all their bank accounts on its
website.
He said fintech firms would agree to more-secure connections
with banks—avoiding what is known as "screen scraping," or simply
plugging data from a webpage by using a customer's username and
password—as long as they are provided.
"Nobody likes screen scraping, but not all banks have made
alternatives available yet," he said. "Everybody has a right to
access their financial data and provide it to third parties."
Write to Telis Demos at telis.demos@wsj.com
(END) Dow Jones Newswires
June 19, 2016 20:35 ET (00:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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