How Plaid’s API Brings Finance into the 21st Century
This is the 3rd edition of GET PUT POST, a newsletter all about APIs. Each edition features an interview with a startup about their API and ideas for developers to build on their platform. Want the latest interviews in your inbox? Sign up here.
For this edition, I spoke with Zach Perret, Co-Founder & CEO at Plaid. This startup is fixing the infrastructure of banks and credit cards with a modern REST API. Enjoy the interview!
What is Plaid?
Plaid is a technology layer on top of the current financial infrastructure. We build a platform and set of tools that enable developers to interact with bank accounts, execute payments, and manage risk when building financial applications. Plaid’s platform allows a user to easily authenticate and link their bank account to any application, and then get bank-like functionality out of that app.
How did you come up with the idea?
Completely by accident! We built a consumer financial management and recommendation tool, and realized we needed to build some of the current Plaid API as the back-end. It turns out that our app wasn’t very good, but we had struck a chord with developers that needed a way to connect with bank accounts. We dropped the front-end, focused on the API, and have been heads-down ever since!
Who are 2–3 sample customers? How do they use Plaid to be successful?
We work with 300–400 applications that span every segment of financial services. Broadly, customers use Plaid to do one of two things: setting up payments and validating financial data.
- On the payments side, we work with companies like Venmo, Zenefits, Robinhood, and Wealthfront to set up and help execute their ACH payments.
- On the data side, customers collect transaction data, validate a user’s identity, check employment and income data, and check on the riskiness of users. Example customers are Capital One, Coinbase, Betterment, and Acorns.
[You can find out more about Coinbase in this interview: Building a Bitcoin Platform with Coinbase.]
What are some upcoming features/endpoints you’re excited about?
I can’t talk about it too much! Broadly though, you can expect us to go a lot deeper on the data side in the coming months/years. There’s so much meaningful insight that is locked up in users’ financial data, and we’re excited to unlock that.
What are a few killer apps that someone should build using Plaid?
There are tons! It’s hard to even write down all the interesting areas I wish people would build applications, but I’ll try to limit it to three:
Anything focused on acquisition and savings for millenials. Digit and Acorns are some early examples of this, but millenials present a massive opportunity in financial services. For most banks, customers under 40 are not profitable — they don’t hold large balances, make big trades, have mortgages, or hold a lot of debt (all the ways banks make money). Capturing these millenials early (and cheaply), and helping them build a responsible financial life is a massive opportunity in the long-run.
Better underwriting and servicing. The credit score is largely outdated as a means for evaluating creditworthiness — it’s opaque and influenced by factors that don’t necessarily impact how likely a consumer is to pay back a loan. As such, most online lenders are already collecting additional data sources — including bank transaction and balance data. There are tons of opportunities to build new and better tools for lenders to both underwrite the initial loan and, importantly, service the loan and collect repayments on an ongoing basis.
The credit score is largely outdated as a means for evaluating creditworthiness — it’s opaque and influenced by factors that don’t necessarily impact how likely a consumer is to pay back a loan.
Automated tax returns. Today, there’s no good middle ground between TurboTax and hiring a full-on accountant. The tax code is essentially a long bit of business logic that can be optimized with the right income and spending data. I’m still waiting for someone to build a killer tax application using Plaid for this.
APIs in the News
- First Preview of Android N: Developer APIs & Tools: Android released a super early developer preview. New features include multi-window support (think picture-in-picture video apps) and big improvements to notifications like direct replies.
- The Open API Initiative: Some big cloud players like Google and Atlassian created a new Swagger-like spec for describing APIs. You can check out this live example and see how it could make it a lot easier for humans and computers to “understand” API schema.
- BankBotsBank: I saw this new Github repo on HN and thought it was pretty interesting given this week’s interview. It’s an open-source effort to give programmatic access to bank accounts, starting with Spanish bank BBVA.
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