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Jan 17, 2020

What Plaid's acquisition means for developers

Visa acquires Plaid

Visa acquired Plaid, a San Francisco based technology company building financial services APIs, for roughly $5.3B.

With its acquisition, Visa adds serious political clout to Plaid’s technology prowess—potentially turning the financial sector into a developer-first ecosystem that gives developers better tools to build more powerful consumer applications.

What is Plaid? Developers can use Plaid’s APIs to let users connect their bank accounts to their applications. Plaid acts as a data mediator—handling authentication and standardizing data requests—between these financial apps and traditional banks.

One example: Venmo, Paypal’s popular mobile payment app, uses Plaid to transfer funds between users. Venmo is also one of Plaid’s largest customers.

To build its APIs, Plaid has hacked together an unofficial solution. Most banks do not have APIs, so Plaid attempts to log into bank websites on the user’s behalf—allegedly failing 5-10% of the time.

This is huge for developers. Visa’s acquisition could mark a more official beginning to an API revolution in financial services.

As the world’s second largest payment organization in the world and the largest US card network, Visa holds considerable sway over giant financial institutions. Visa can convince banks around the world to integrate with Plaid's platform. That firmly plants Plaid at the center of a newly standardized financial API economy.

With Visa's backing, developers will feel more comfortable building apps that access private information and banks will feel more comfortable handing over more data and functionality. That creates massive opportunities for developers to jumpstart their own ecosystem of financial apps.

It's an unstoppable trend. Heavily regulated sectors or industries dominated by giant legacy companies—like finance and healthcare—have largely been immune to the rise of API platforms.

Yet Plaid’s success puts it on the same trajectory as other API giants, like Twilio and Stripe. Just as those companies revolutionized how developers implement messaging and payments, Plaid can do the same for finance—especially with a juggernaut like Visa in its corner.

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