What is Plaid? How can it be used for Digital Bank References?

Jul 3, 2024

2 min read

Plaid is a financial technology company that enables applications to connect with users' bank accounts. By facilitating secure data connectivity, Plaid provides a critical link between financial institutions and fintech applications, allowing users to seamlessly manage their financial data across various platforms. Popular applications like Venmo, Betterment, and Chime use Plaid to connect with users' bank accounts quickly and securely.

Key Features of Plaid

Secure Data Connectivity: Plaid uses Advanced Encryption Standard (AES-256) and Transport Layer Security (TLS) to protect user data. Multi-factor authentication further ensures data security, making it one of the most secure platforms for financial data connectivity.
Instant Account Verification: Plaid streamlines the account verification process, allowing new users to quickly and securely link their bank accounts with financial apps. This instant verification reduces the time and complexity typically involved in onboarding new customers.
Fraud Prevention and Compliance: Plaid offers tools for fraud detection and compliance with regulatory requirements such as Anti-Money Laundering (AML) and Know Your Customer (KYC). This helps digital banks manage risks effectively while adhering to industry standards.

Digital vs Manual Bank References

Aspect	Digital Bank References	Manual Bank References
Speed	Instant verification and account information	Takes days or weeks to complete
Efficiency	Automated processes minimize errors and speed up the workflow	Requires significant manual labor, prone to errors and delays
Security	Advanced encryption (AES-256) and multi-factor authentication ensure data protection	Relies on human oversight, less secure, with potential for documents to be misplaced or mishandled
Fraud Prevention	Automated fraud detection systems flag suspicious activities	Limited to individual vigilance, higher risk of undetected fraudulent activities
Data Accuracy	Automation ensures accurate data collection and processing	Prone to human errors in data entry and processing
Reliability	Consistent and reliable data pulled directly from verified financial institutions	Inconsistent checks and balances, leading to variability in data quality and reliability
Accessibility	Accessible from anywhere, anytime via secure online platforms	Limited to office hours and physical locations
Convenience	Seamless connection of financial accounts with real-time data sharing and updates	Requires physical presence or mailing documents, slower and less convenient
Cost-effectiveness	Reduces long-term costs by automating processes and minimizing the need for manual labor	Higher ongoing costs due to manual processing, staff salaries, and physical resources

How can Plaid be used for Digital Bank References?

Customer Onboarding & Verification: Plaid’s Identity API ensures accurate verification of customer identities during account setup, preventing unauthorized access and fraud. This is crucial for digital banks that need to verify user identities quickly and reliably.
Transaction Monitoring & Insights: By accessing up to 24 months of transaction history, Plaid enables applications to offer personalized financial advice and track spending patterns. This helps users manage their cash flow more effectively and make informed financial decisions.
Comprehensive Financial Overview: Plaid aggregates data from various financial accounts, providing users with a comprehensive view of their financial health. This includes data on bank accounts, credit cards, loans, and investments, allowing users to manage all their finances from a single platform.

Plaid revolutionizes digital banking by providing a secure, efficient, and comprehensive platform for connecting financial data. Credit managers can leverage Plaid to enhance customer onboarding, ensure compliance, prevent fraud, and improve their decision-making. This not only improves the user experience but also builds trust and operational efficiency. Ready to see how NetNow uses Plaid & can help your business? Call us 1-833-663-8669 or Book a Demo here!