Plaid officially expands into identity and income verification, fraud prevention, and account funding – TechCrunch

Scottish decacorn Fintech is expanding beyond its core account linking product, its first major expansion since its inception in 2013.

In conjunction with its “Plaid Forum” event, the startup today unveiled a series of “product enhancements and new initiatives,” including moving to identity and income verification, fraud prevention, and providing new tools for account funding and disbursements. .

The move comes two weeks after payment giant Stripe announced it was encroaching on Plaid’s turf with own new product.

In a blog post titled “Marking the Next Phase of Fintech,” Plaid CEO and Co-Founder Zach Perret noted that the majority of Plaid’s network traffic has been through direct banking APIs which are made possible by banking partnerships and Plaid Exchange, a data access offering. used by more than 1,000 banks and fintechs to offer their customers API-based data access.

But now, the company has expanded its data connectivity offerings to include core exchangewhich, according to Perret, offers banks, fintechs or “data partners” another way to share data “securely” when using Plaid.

Alain Meier, head of identity at Plaid, told TechCrunch that account connectivity has always been the company’s core focus. Over the years, he notes, Plaid has helped power connectivity for millions of accounts, especially as more consumers use digital financial services.

Over time, as Perret shares, the company has added more fintech companies to its network, including Chime, Dave, Robinhood, and SoFi. It also added new types of data connections, such as payroll data so people can check their income and employment details when doing things like getting a loan or buying a car.

And as fintech adoption has grown in recent years, so has Plaid’s customer demand for the company to address the onboarding experience more.

“Ultimately, this helps build trust and security for the entire ecosystem as more people get on board with new fintech applications and services,” Meier said. “That’s why we’re expanding our platform to now include identity verification and new tools for quick and easy account funds and disbursements.”

The move to identity verification is hardly a surprise considering Plaid shelled out $250 million in January to buy Cognitowhich it offered identity verification, along with help with thorny issues like KYC rules and anti-money laundering requirements.

“When Cognito joined Plaid, we estimated that about 90% of Plaid customers need some form of identity verification, so this is a natural extension for Plaid,” Meier told TechCrunch. And Perrett confirms that Plaid’s new identity verification offerings bring Cognito products to the Plaid API.

The company has integrated its new verification product into Plaid Link, with the goal of allowing customers to link their accounts and verify their identities in “a single, seamless user experience,” Meier said.

Identity has always been a priority for Plaid, he says, starting with an API to confirm account ownership during authentication. In the past, Plaid’s customers had to work with six to 12 different vendors to handle all the different aspects of the identity verification and fulfillment flow, Meier said.

Beyond those new offerings, in perhaps the most surprising new news from the company today, Plaid said it also hopes to convert new users into active customers through account funding, which will give people a way of paying, or being paid, for goods and services.

“Funding an account is the first step a user takes to invest, send money or start using a digital wallet,” Meier said. “We are working to make account funds and transfers an integral part of the overall onboarding experience to enhance this critical activation step.”

Finally, the company believes it now offers risk-based tools designed to help reduce risk and fraud in account funding and ACH transfers. Its new Signal offering (transaction monitoring), for example, uses machine learning to analyze more than 1,000 risk factors and provides scores and information that Plaid says provides “more certainty that a transaction will settle,” so that a company can speed up access to those funds without increased risk. Early customers, Plaid claims, have seen “significant reductions” in unauthorized returns and NSF fees.

Plaid in April 2021 raised a $425 million Series D at a $13.4 billion valuation. The nine-year-old company made headlines last year when the deal it had struck to be acquired by consumer credit giant Visa for $5.3 billion fell through due to regulatory concerns, an event many say turned out to be a blessing in disguise for the start up.

Identity verification is an increasingly crowded and well-funded space. Socure, a company that uses AI and machine learning to verify identities, raised $450 million in funding last November for its Series E round led by Accel and T. Rowe Price. Persona, a startup focused on creating a personalized identity verification experience “for any use case,” which says it helps businesses customize the identity verification process, and beyond, through its no-code platform assured $50 million in a Series B funding round in May. of 2021. And last August, a pair of early Affirm employees raised $70 million for SentiLink, an identity verification startup.

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