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.

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. 

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