Innovation

Plaid Launches Direct Funds Transfer Ecosystem

online banking

A new service launched Wednesday (May 22) called Plaid Direct enables “two-way connectivity across the financial ecosystem and makes it easier for consumers to move money between their accounts — whether it’s in a neobank, FinTech, or big box bank account,” according to a statement from Plaid.

In a blog post, the company said it now offers a “lightweight integration specification that allows banks and FinTech applications to quickly and easily become a data source in the Plaid network. By doing so, businesses can enable their customers to enjoy open banking-style connectivity across their toolkit of financial services providers.”

Changing regulations and open banking are redefining the obligations of financial institutions, forcing them to rethink their strategies and implement new technological approaches. New legislation, such as PSD2, is raising the bar for FIs by allowing organizations like FinTechs to provide financial services. Such rules require traditional FIs to securely open up their customer data and require new levels of transparency from service providers, which must reveal everything from fees and exchange rates to liabilities and transaction time frames.

Here’s how the service works, according to Plaid: “Once you have integrated via Plaid Direct, end users can select your institution or app in Plaid Link and connect their accounts with personal financial management apps, such as Drop and Qapital. Your customers can also use their accounts as a funding source for other services, such as Acorns and Coinbase.”

Plaid said the new service already has sparked innovation, via Varo Money. It’s offering consumers an “unprecedented level of financial freedom” by enabling consumers to use funds from their Varo account to fund their Betterment account.

“Varo’s goal is to help our customers make smart financial decisions by ensuring they can see their full financial picture, ideally across all their money apps. The Plaid Direct specification enabled us to easily build into the Plaid network and enable our customers to do just that,” said James Pelham Burn, product manager at Varo.

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