Jeff Kauflin is a senior editor who leads Forbes’ fintech coverage, covering everything from digital banking and investing to payments and insurtech. He co-edits Forbes’ annual Fintech 50 and also writes about crypto. Jeff joined Forbes in 2016 and works in New Jersey.
After being valued at $13.4 billion in 2021, fintech’s data plumber saw growth slow dramatically. Now CEO Zach Perret is moving aggressively into three new lines of business., took the stage at the company’s annual customers conference in June, dressed all in black, his blond hair down to his shoulders, surfer-style.
Plaid is certainly not worth $13.4 billion now; estimates put it at anywhere from $3.8 billion to $8 billion —making Perret’s stake still worth hundreds of millions. The CEO of another fintech unicorn neatly sums up the questions around Plaid’s future: “Is it a business that, in a steady-state world, does $300 to $400 million of annual revenue? Or is it a business that does billions of annual revenue as it scales? I don’t think anyone knows.
The initial approach Plaid and its fellow data aggregators took to connecting fintech apps to bank data was bold–and controversial. It created a bot that would prompt customers to enter their bank usernames and passwords, log in on their behalf, scrape any information it needed and transfer the requested data to a fintech app. Banks were enraged and terrified of the potential cybersecurity risks.
Eric Sager, Plaid’s chief operating officer, says that even though the 2020 Visa deal failed, it boosted Plaid’s credibility and sales. Yet the year-long pending transaction also exacted a cost, with the prospect of a takeover slowing new product development. “When there’s an announcement that Visa is buying us, that’s normally not followed by an all-night programming session,” observes Alex Rampell, a general partner at Plaid investor Andreessen Horowitz.
Perret says Plaid’s network of data on bank-account balances and transaction history gives it an edge in estimating cash flow, especially for “thin-file” consumers who have little or no credit history with the three main credit bureaus. In theory, cash flow data can help lenders accept more of these borrowers or offer them lower interest rates than they otherwise could. And Plaid can charge a premium for it–as much as $5.
Another industry executive says Perret could have repaired relationships with banks faster by acknowledging that he may have underestimated their legitimate cybersecurity concerns. “When you just show up one day and say, ‘Oh, banks are now my friends,’ it’s disingenuous,” he says. In 2022, Plaid bought Cognito, a then nine-year-old identity verification company based in Oregon, for $250 million. Its products help financial institutions verify that people are who they say they are and comply with federal know-your-customer regulations, using information ranging from phone and Social Security numbers to selfies and typing patterns.
Still, U.S. merchants love the idea of pay-by-bank because it cuts their cost of accepting payment by as much as 40%. Now more Americans are starting to use pay-by-bank to pay digitally through transfers facilitated by Plaid and a growing list of competitors, including Stripe, Trustly, JPMorgan and Mastercard’s Finicity.
Visa Antitrust Debit Cards Fintech Venmo Robinhood Chime Zach Perret William Hockey
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