How Does Plaid Make Money? Plaid Business Model In A Nutshell

  • Plaid is an American financial services company founded by Zach Perret and William Hockey in 2013. The core product is a platform that enables users to connect their bank accounts to various fintech companies.
  • Plaid operates a freemium business model, where prospects can try the product in a sandboxed environment to get a feel for the platform.
  • For prospects that are ready to add increased functionality and test systems using real-world data, Plaid offers two paid plans: Launch and Scale. The latter is a tailored and fully integrated solution where prices start at $500/month.

Origin story

Plaid is an American financial services company founded by Zach Perret and William Hockey in 2013.

The core product is a platform that enables users to connect their bank accounts to various fintech companies.

Perret and Hockey met as young consultants at global management firm Bain & Company. Frustrated with the lack of transparency in the bills they were paying, the pair tried to create a financial planning tool.

The tool was a failure, but in the process of trying to develop it, they solved the technical challenge of connecting the app to their bank accounts.

At the time, most businesses depended on micro-transactions to verify customer bank accounts.

More cumbersome methods involved paper statements uploaded in PDF form with data entered manually.

To streamline this process, Perret and Hockey wanted to create an application programming interface (API) to perform the same function with only the username and password of the applicant.

While the platform was being constructed in 2012, a mutual friend who happened to be the head of engineering at Venmo showed interest.

The engineer was searching for a better way to link Venmo’s peer-to-peer payment app with customer bank accounts and asked the pair if they would be willing to test their creation.

The experiment was a success, with validation from Venmo helping Plaid secure deals with other platforms hoping to emulate Venmo’s success.

Perret and Hockey then moved to San Francisco to recruit more engineers and pitch their idea to investors, but they were rejected at least 50 times.

In July 2013, they eventually secured a $2.9 million round of funding from Spark Capital. Four years later, Plaid boasted clients such as Robinhood, Wealthfront, Wells Fargo, Chime, and Chase.

Plaid became a tech unicorn in late 2018 with a $250 million round of funding valuing the company at $2.65 billion.

Recent figures show the platform now integrates with more than 11,000 banks connected to 200 million consumer accounts.

Value Proposition:

  • Workflow Automation: ServiceNow allows organizations to automate a wide range of processes and tasks, from IT service management to HR, customer service, and more. This automation leads to faster response times and increased operational efficiency.
  • Unified Platform: The platform provides a single, unified solution for various departments and functions within an organization. It breaks down silos and encourages collaboration and transparency across the entire enterprise.
  • Scalability: ServiceNow’s solutions are highly scalable, making them suitable for both small businesses and large enterprises. Organizations can start with specific modules and expand as their needs grow.
  • Customization: ServiceNow offers a high degree of customization, allowing businesses to tailor the platform to their specific requirements and industry regulations.

Customer Segments:

  • Enterprises: Large and complex organizations across various industries, including finance, healthcare, manufacturing, and technology, use ServiceNow to streamline their operations, improve service delivery, and manage digital workflows.
  • IT Departments: ServiceNow’s IT service management (ITSM) solutions are widely adopted by IT departments to enhance IT service delivery, automate incident management, and optimize IT operations.
  • Government Agencies: Government organizations at the federal, state, and local levels leverage ServiceNow’s platform to improve citizen services, increase operational efficiency, and ensure compliance with regulations.
  • Service Providers: Managed service providers (MSPs) and IT service providers use ServiceNow to deliver services to their clients more efficiently, monitor performance, and resolve issues proactively.

Distribution Strategy:

  • Direct Sales: ServiceNow has a dedicated salesforce that directly engages with potential customers, including enterprises, government agencies, and IT departments. The sales team identifies customer needs, provides product demonstrations, and facilitates the sales process.
  • Channel Partners: ServiceNow also collaborates with a network of authorized channel partners, including system integrators, consulting firms, and value-added resellers (VARs). These partners play a crucial role in implementing, customizing, and supporting ServiceNow solutions for customers.
  • Online Platform: ServiceNow offers an online platform where customers can explore product information, access resources, and request demos. This platform serves as an additional distribution channel for customers seeking information and support.

Marketing Strategy:

  • Content Marketing: ServiceNow creates and shares valuable content, including whitepapers, case studies, webinars, and blog posts. This content highlights the benefits of workflow automation and addresses specific industry challenges.
  • Thought Leadership: The company positions itself as a thought leader in digital transformation and workflow automation. It participates in industry events, conferences, and webinars to share insights and expertise.
  • Industry Verticals: ServiceNow tailors its marketing efforts to specific industry verticals, addressing the unique needs and challenges of each sector. This approach resonates with organizations looking for industry-specific solutions.
  • Online Advertising: ServiceNow utilizes online advertising campaigns to target potential customers across digital channels. These campaigns drive traffic to the company’s website and promote product awareness.
  • Partner Collaboration: ServiceNow collaborates closely with its channel partners, enabling them to market and sell ServiceNow solutions. Joint marketing efforts with partners extend the company’s reach and customer engagement.
  • Customer Success Stories: ServiceNow shares success stories and case studies that highlight real-world examples of organizations benefiting from its platform. These stories demonstrate the tangible impact of ServiceNow’s solutions.

Plaid revenue generation

Plaid operates under the freemium business model, which means the core product can be accessed free of charge.

In the free plan, prospects can connect to 100 bank accounts and test sample data in a sandbox environment.

For extra functionality, there are two paid subscription options. Before we delve into these options, it should be noted that the company’s pricing strategy is not designed to make a prospect choose from a list of plans.

Instead, the strategy helps a new client become acquainted with the free platform before transitioning to a customized account that suits their needs.

With that in mind, here are the two paid plans:

  1. Launch – a pay-as-you-go option with the ability to authorize accounts and check transactions and balances. Prices are available on request.
  2. Scale (prices start at $500/month) – a more tailored solution with volume pricing, dedicated premium support, and integration assistance. Customers on this plan can also access detailed user data concerning their assets, liabilities, and investments. This data, for example, can be used to decide whether to approve or reject a loan application.

Ancillary fees

Once a customer has opted into a paid plan, several fees may be applicable:

  • One-time fees – these are charged for tasks that only need to be performed once. For example, a personal finance app will need to pay a one-time fee every time it authorizes a client account and verifies their identity.
  • Subscription fees – the same personal finance app may also want to understand how its members are spending their money. To do so, the company uses Plaid’s real-time account balance monitoring functionality. Since this is an action that occurs repeatedly, it is billed as a recurring subscription fee. Plaid charges for this service on a per-connection, per-month basis and offers volume discounts.
  • Per-request fees – Plaid also charges a flat per-request fee. If the personal finance app allows members to transfer money between accounts, they need to ensure the transferring account has enough funds to begin with. To facilitate the transfer, Plaid will check the member’s account on behalf of the app company and earn a fee. 

Key Takeaways

  • Origin story:
    • Founded in 2013 by Zach Perret and William Hockey.
    • Created a platform to connect bank accounts to fintech companies.
    • Gained traction after successful integration with Venmo.
  • Freemium Business Model:
    • Core product accessible for free in a sandboxed environment.
    • Two paid plans available for increased functionality: Launch and Scale.
    • Scale offers tailored solutions starting at $500/month.
  • Tech Unicorn Status:
    • Became a unicorn in late 2018 with $250 million funding.
    • Valued at $2.65 billion.
  • Wide Integration Reach:
    • Integrates with over 11,000 banks and 200 million consumer accounts.
    • Serves clients like Robinhood, Wealthfront, Wells Fargo, Chime, and Chase.
  • Revenue Generation:
    • Freemium model with core product free of charge.
    • Paid plans: Launch (prices available on request) and Scale (starting at $500/month).
  • Launch Plan:
    • Pay-as-you-go option with account authorization and transaction checking.
    • Specific prices available on request.
  • Scale Plan:
    • Tailored solution with volume pricing, dedicated premium support, and integration assistance.
    • Customers access detailed user data for asset, liability, and investment information.
    • Data can help with loan application approval decisions.
  • Ancillary Fees:
    • One-time fees for tasks performed once, such as account authorization and identity verification.
    • Subscription fees for recurring actions like real-time account balance monitoring.
    • Per-request fees charged for specific requests, such as fund transfers between accounts.
Value PropositionPlaid offers a compelling value proposition for its customers, including: – Financial Data Access: Providing access to a wide range of financial data from various financial institutions through a single API. – Simplified Integration: Offering developers a seamless and simplified way to integrate with financial data sources. – Enhanced User Experiences: Enabling fintech companies to create user-friendly and personalized financial apps and services. – Security and Compliance: Ensuring the security and compliance of financial data sharing and transactions. – Innovation Acceleration: Empowering developers to build innovative financial products and services. – Financial Inclusion: Supporting broader financial inclusion by facilitating access to financial services. – Data Insights: Offering valuable insights and analytics derived from financial data. – Partnership Opportunities: Collaborating with fintech firms to expand their product offerings. – Scale and Reliability: Providing scalable and reliable infrastructure for financial data connectivity.
Core Products/ServicesPlaid’s core products and services encompass: – API Integration: Offering a suite of APIs that allow developers to connect their applications to various financial institutions. – Data Connectivity: Enabling access to a wide range of financial data, including bank account information, transaction history, balances, and more. – Transaction Verification: Providing tools to verify account ownership and transaction authenticity. – Identity Verification: Offering identity verification services for KYC (Know Your Customer) purposes. – Analytics and Insights: Delivering data analytics and insights derived from financial data. – Payment Initiation: Facilitating payment initiation and ACH transfers. – Compliance Tools: Assisting with compliance requirements related to financial data access. – Authentication Solutions: Enhancing security through multi-factor authentication and tokenization. – Developer Resources: Providing documentation, SDKs, and support for developers integrating Plaid into their applications.
Customer SegmentsPlaid serves a range of customer segments, including: – Fintech Startups: Assisting early-stage fintech companies in building innovative financial products and services. – Established Fintech Firms: Partnering with larger and established fintech companies looking to expand their offerings. – Financial Institutions: Collaborating with banks and credit unions to enhance their digital offerings and APIs. – Payment Processors: Working with payment processors to facilitate payment initiation and transactions. – Developers and Engineers: Offering tools and resources for developers and engineers looking to integrate with financial data. – Mobile App Developers: Supporting mobile app developers in creating user-friendly and feature-rich financial applications. – Regulatory and Compliance Bodies: Assisting regulatory and compliance bodies in ensuring secure and compliant data access. – Businesses and Enterprises: Serving businesses seeking to optimize financial processes and access data for financial decision-making. – Investment and Wealth Management Firms: Collaborating with firms to offer wealth management and investment apps. – Consumer End-Users: Benefiting end-users who use financial apps powered by Plaid for managing their finances.
Revenue StreamsPlaid generates revenue through various revenue streams: – API Usage Fees: Charging developers and fintech companies based on the number of API calls and data accessed. – Subscription Plans: Offering subscription plans with tiered pricing for different levels of service and support. – Enterprise Solutions: Providing customized enterprise solutions with pricing tailored to specific needs. – Data Licensing: Licensing financial data to third-party organizations and researchers. – Premium Features: Offering premium features and advanced functionality at an additional cost. – Payment Initiation Fees: Earning fees from payment initiation and ACH transfers. – Consulting and Support Services: Providing consulting and support services to ensure successful integration and compliance. – Strategic Partnerships: Collaborating with financial institutions and fintech firms through revenue-sharing agreements. – International Expansion: Expanding services to international markets and generating revenue from global customers. – Data Insights and Analytics: Offering data insights and analytics services with associated fees.
Distribution StrategyPlaid employs a strategic distribution strategy to reach customers: – Developer-Centric Approach: Focusing on developers as key users and providing developer-friendly tools and documentation. – Online Platform: Operating a web-based platform for developers to access resources, documentation, and support. – SDKs and Libraries: Offering SDKs and libraries for various programming languages to streamline integration. – API Marketplace: Partnering with API marketplaces to reach a broader developer audience. – Direct Sales and Partnerships: Engaging in direct sales efforts and forming strategic partnerships with fintech firms and financial institutions. – Education and Training: Providing educational resources, webinars, and training sessions for developers and customers. – Developer Community: Building and nurturing a developer community through forums and events. – Security and Compliance: Highlighting robust security measures and compliance with data protection regulations. – Global Expansion: Expanding services to international markets and tailoring offerings to regional needs. – Customer Support: Offering responsive customer support for technical assistance and integration guidance.

Main Free Guides:

Read More: How Does TD Ameritrade Make MoneyHow Does Dave Make MoneyHow Does Webull Make MoneyHow Does Betterment Make MoneyHow Does Wealthfront Make MoneyHow Does M1 Finance Make MoneyHow Does Mint Make MoneyHow Does NerdWallet Make MoneyHow Does Acorns Make MoneyHow Does SoFi Make MoneyHow Does Stash Make MoneyHow Does Robinhood Make MoneyHow Does E-Trade Make MoneyHow Does Coinbase Make MoneyHow Does Affirm Make MoneyFintech Companies And Their Business Models.

Related FinTech Business Models

Acorns Business Model

Acorns is a fintech platform providing services related to Robo-investing and micro-investing. The company makes money primarily through three subscription tiers: Lite – ($1/month), which gives users access to Acorns Invest, Personal ($3/month) that includes Invest plus the Later (retirement) and Spend (personal checking account) suite of products, Family ($5/month) with features from both the Lite and Personal plans with the addition of Early.

Affirm Business Model

Starting as a pay-later solution integrated into merchants’ checkouts, Affirm makes money from merchants’ fees as consumers pick up the pay-later solution. Affirm also makes money through interest earned from the consumer loans when those are repurchased from the originating bank. In 2020 Affirm made 50% of its revenues from merchants’ fees, about 37% from interests, and the remaining from virtual cards and servicing fees.

Alipay Business Model

Alipay is a Chinese mobile and online payment platform created in 2004 by entrepreneur Jack Ma as the payment arm of Taobao, a major Chinese eCommerce site. Alipay, therefore, is the B2C component of Alibaba Group. Alipay makes money via escrow transaction fees, various value-added ancillary services, and its Credit Pay Instalment fees.

Betterment Business Model

Betterment is an American financial advisory company founded in 2008 by MBA graduate Jon Stein and lawyer Eli Broverman. Betterment makes money via investment plans, financial advice packages, betterment for advisors, betterment for business, cash reserve, and checking accounts.

Chime Business Model

Chime is an American neobank (internet-only bank) company, providing fee-free financial services through its mobile banking app, thus providing personal finance services free of charge while making the majority of its money via interchange fees (paid by merchants when consumers use their debit cards) and ATM fees.

Coinbase Business Model

Coinbase is among the most popular platforms for trading and storing crypto-assets, whose mission is “to create an open financial system for the world” by enabling customers to trade cryptocurrencies. Its platform serves both as a search and discovery engine for crypto assets. The company makes money primarily through fees earned for the transactions processed through the platform, custodial services offered, interest, and subscriptions.

Compass Business Model

Compass is a licensed American real-estate broker incorporating online real estate technology as a marketing medium. The company makes money via sales commissions (collected whenever a sale is facilitated or tenants are found for a rental property) and bridge loans (a service allowing the seller to purchase a home before the revenue from the sale of their previous home is available).

Dosh Business Model

Dosh is a Fintech platform that enables automatic cash backs for consumers. Its business model connects major card providers with online and offline local businesses to develop automatic cash back programs. The company makes money by earning an affiliate commission on each eligible sale from consumers.

E-Trade Business Model

E-Trade is a trading platform allowing investors to trade common and preferred stocks, exchange-traded funds (ETFs), options, bonds, mutual funds, and futures contracts; acquired by Morgan Stanley in 2020 for $13 billion. E-Trade makes money through interest income, order flow, margin interests, options, future and bonds trading, and other fees and service charges.

Klarna Business Model

Klarna is a financial technology company allowing consumers to shop with a temporary Visa card. Thus it then performs a soft credit check and pays the merchant. Klarna makes money by charging merchants. Klarna also earns a percentage of interchange fees as a commission and for interests earned on customers’ accounts.

Lemonade Business Model

Lemonade is an insurance tech company using behavioral economics and artificial intelligence to process claims efficiently. The company leverages technology to streamline onboarding customers while also applying a financial model to reduce conflicts of interest with customers (perhaps by donating the variable premiums to charity). The company makes money by selling its core insurance products, and via its tech platform, it tries to enhance its sales.

NerdWallet Business Model

NerdWallet is an online platform providing tools and tips on all matters related to personal finance. The company gained traction as a simple web application comparing credit cards. NerdWallet makes money via affiliate commissions determined according to the affiliate agreements.

Robinhood Business Model

Robinhood is an app that helps to invest in stocks, ETFs, options, and cryptocurrencies, all commission-free. Robinhood earns money by offering: Robinhood Gold, a margin trading service, which starts at $6 a month, earns interests from customer cash and stocks, and rebates from market makers and trading venues.

SoFi Business Model

SoFi is an online lending platform that provides affordable education loans to students, and it expanded into financial services, including loans, credit cards, investment services, and insurance. It makes money primarily via payment processing fees and loan securitization.

Stash Business Model

Stash is a FinTech platform offering a suite of financial tools for young investors, personalized investment advice, and life insurance. The company primarily makes money via subscriptions, cashback, payment for order flows, and interest for cash sitting on members’ accounts.

Wealthfront Business Model

Wealthfront is an automated Fintech investment platform providing investment, retirement, and cash management products to retail investors, mostly making money on the annual 0.25% advisory fee the company charges for assets under management. It also makes money via a line of credits and interests on the cash accounts.

Zelle Business Model

Zelle is a peer-to-peer payment network that indirectly benefits the banks’ consortium that backs it. Zelle also enables users to pay businesses for goods and services free for users. Merchants pay a 1% fee to Visa or Mastercard, who share it with the bank that issued the card.

About The Author

Scroll to Top