In the wake of its abandoned deal with Visa, Plaid is fully venturing on its own into the payments landscape.
In terms of the mechanics, the program that was announced Thursday (Oct. 21) entails Plaid offering its software in a way that enables users (consumers and businesses among them) to make digital payments funded by users’ bank accounts.
The funds will be transferred by third-party payment processors, while a “pay by bank” option will appear at checkout.
But beyond the payments lies a nod to just how firmly entrenched open banking, and data aggregation, have become.
Launching an Ecosystem
In a blog post Thursday, Plaid said it is “launching an ecosystem of payment partners to provide flexible options for any company to make bank payments an option in their checkout flows, and streamline digital account onboarding, top ups, and payouts, all at lower costs.”
That ecosystem, spanning Europe and North America, is being built around existing partnerships Plaid has in place with companies like Square, and new relationships with companies like Marqeta and Checkout.com, among others.
The enhanced data connectivity in the ecosystem, Plaid said in the post, significantly reduces the time to enable account-to-account transactions. Those transactions, Plaid said, historically had not been a “popular choice” as they were slow and cumbersome to set up — users had to look up account numbers or wait to initiate transactions after microdeposits went through.
Through Plaid’s direct connectivity, the company said — and with that connectivity spanning 11,000 institutions — the account-to-account activity, and open banking activity, is instant. The transactions will not involve credit or debit cards, which is why Plaid contends that the ecosystem would serve as a complement to, and not a competitor to, the card networks.
“We are confident we would have prevailed in court as Plaid’s capabilities are complementary to Visa’s, not competitive,” Visa CEO Al Kelly said in a statement when Visa ended its plans in the wake of a suit by the Department of Justice. “However, it has been a full year since we first announced our intent to acquire Plaid, and protracted and complex litigation will likely take substantial time to fully resolve.”
The Thursday news, of course, represents an affirmation of reports when Visa struck its pact to buy Plaid for $5.3 billion that the latter firm would be branching into payments. We contend that beyond that “answer” — will they or won’t they embrace payments? — the alternative payment methods tied to account-to-account activity speak to the need for connected infrastructure.
The tailwind for such connectivity is there. In a recent survey, PYMNTS found that A2A transactions grew by 60% in 2020. Open banking, which facilitates faster and more direct transactions, can benefit all manner of transactions, which in turn can help improve B2B transactions, which have traditionally been mired in paper checks. And across the pond, in other recent data, as noted in the Open Banking API Playbook, the share of U.K. consumers expected to use open banking by September 2023 might top 60%.