It just got easier for popular finance apps to link to digital banks, instead of traditional ones.
Start-up Plaid, recently valued at $2.7 billion, already connects bank accounts to fintech apps like Venmo, Robinhood, Coinbase and Acorns. It announced “Plaid Direct” on Wednesday, which lets users more easily connect to newer digital banks like Chime.
Before the new, back-end product known as an API, users couldn’t pay a friend through Venmo for a restaurant bill with money they had in a start-up bank. That Venmo account could only be funded through a traditional financial institution. This lets fintech apps go directly to each other.
“You should be able to interact with your money and your data in PayPal just like you could with a credit union or a bank — this allows that to happen much faster,” Baker Shogry, head of product at Plaid, told CNBC in a phone interview. “It really just helps make the entire thing work together more seamlessly.”
Shogry said this does not bypass, or change anything from a regulatory perspective.
Start-up bank Varo has been testing the product and said users can now be instantly verified in order to fund their Betterment accounts. James Pelham Burn, product manager at Varo, told CNBC in an email that the new Plaid product ensures “they can see their full financial picture” across of all of their money apps.
This new option comes as consumers’ financial options are skyrocketing. According to a 2018 BankRate survey, 63% of smartphone users have at least one financial app on their phone. About a third of millennial respondents said they have at least one budgeting app, and roughly the same percentage had at least one investing app. The booming fintech industry has already been pegged as the ultimate bank “disruptor.” Fintech has put pressure on even the biggest banks, which are trying to compete with the likes of J.P. Morgan, which earmarked $10.8 billion for technology in 2018.
Plaid, founded in 2013 by William Hockey and Zach Perret, said it integrates with more than 10,000 banks and connects to about 20 million consumer accounts. While it does not give specific numbers or a full list of companies, Plaid said its customer base doubled from 2017 to 2018. The start-up recently added widely followed technology forecaster and venture capital investor Mary Meeker to its board.