Plaid: Bank Account Connectivity Underpins ‘Data Revolution’ in Financial Services

For Plaid, the connectivity — tying bank accounts to a broad range of providers across financial systems — lays the groundwork for double-digit growth.

And while the news Thursday (April 3) may have centered on a $575 million capital raise (and a $6.1 billion valuation) and the fact that the firm will reportedly not go public this year, management’s shareholder letter details the movement beyond its foundational account linking activities to provide an on-ramp to an expanding ecosystem of data-driven digital, personalized services and  products.

Momentum From New Businesses

The letter, penned by CEO Zach Perret, is largely qualitative in nature. And it should be noted that, because Plaid is not (and will not be) publicly traded, financial data is incomplete at best — though the trends are up and to the right, as the firm’s data network has underpinned growth in efforts to diversify revenue, through newer business lines such as alternative credit data, anti-fraud offerings and bank payments.

On that last front — pay-by-bank offerings — PYMNTS Intelligence has (in collaboration with Trustly) found that in the United States, 6.4% of consumers said they are already using pay by bank and 40% are at least somewhat interested in using the payment option. Interestingly, consumers earning $100,000 or more are among the most inclined to embrace pay by bank, as 42% saying they are intrigued or interested. We found that higher income consumers are among the earliest of adopters, as 9.4% are already paying by bank.

In an interview last year with Karen Webster, Brian Dammeir, head of payments for Plaid, said that “the user experience is what’s really changing,” particularly in the use case of paying bills. Traditional online bill pay requires users to recall or locate their account information, he said, a process prone to errors. With pay by bank, that friction is eliminated. Consumers can digitally authenticate their account information, making payments through a streamlined, biometric-driven interface.

“It’s about modernizing bank-based payments and putting them on par with other methods in terms of user experience,” he said.

The connectivity to broaden that usage is certainly in place, as Plaid has estimated in its letter Thursday that 1 in every 2 U.S. individuals have used Plaid. “We have a substantial and unique data asset. And our core business has consistently grown double digits year over year despite 2022 and 2023 being the worst slowdown in FinTech in the last two decades,” the CEO said in the letter.

And drilling down a bit, new products stood at a greater than 20% contribution to annual recurring revenues, a segment that has been compounding at 93% annually.  Furthermore, Plaid has successfully broadened its client base to include major enterprise players such as Citi, H&R Block, Invitation Homes, and Rocket, as noted in Perret’s letter.

Longer-Term Strategy

Looking ahead, Perret’s letter strategically positions Plaid as a crucial infrastructure provider for finance. The company emphasizes its role in accelerating the “data revolution” within financial services, with the aim of empowering all participants to leverage data for enhanced customer acquisition, product personalization, risk management, and underwriting.

The company’s strategic priorities for 2025, as outlined by Perret, include accelerated investment in its new business lines and a greater emphasis on data science, machine learning, and AI to further enhance its data analytics capabilities across its solutions.

There’s a tantalizing line in the letter that hints at other growth metrics: “In 2024, we ended the year with [redacted for confidentiality].”

Elsewhere, according to the narrative offered by Perret, “Retail financial services is at a pivotal moment,” as “a small handful of industry giants have emerged with a vast technological and data advantage that they are using to accumulate market share by using data to intelligently target customers more effectively [and] cross-sell products. … The companies that will grow fastest in the next decade will be those who can best use data to their and their end users’ advantage.”

For Plaid itself, “What started as an ‘API for your bank account’ quickly emerged as a critical component of thousands of new financial products built by FinTechs, banks, and enterprises alike,” Perret wrote, marked by 12,000 providers.

“The intelligent use of data will transform how financial services companies acquire customers, personalize products, manage risk, optimize underwriting, and more,” he added.