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Tuesday, November 2, 2021

Plaid reveals new payments 'ecosystem'

If you can't join them, compete with them. That seems to sum up the latest move by data aggregator Plaid. The company just heralded a new "ecosystem" of payments partners that will make it easier for consumers and businesses to make digital payments funded by their bank accounts.

The news, revealed in a blog post by Paul Williamson, head of sales at Plaid, comes less than a year after the U.S. Department of Justice put the kibosh on Plaid's sale to Visa. Visa had offered $5.3 billion for the fintech, but withdrew its offer after the U.S. Department of Justice opposed the deal on anti-trust grounds. In a lawsuit challenging the combination, DOJ lawyers argued that Visa had a "monopoly" on online debit payments, and that Plaid was developing a payments platform that the Visa acquisition was apt to sideline.

The ecosystem just announced by Plaid seems to bear out the DOJ's hope for more competition in online debit payments. The ecosystem will use the ACH and third parties to exchange account-to-account (A2A) payments rather than using the card networks.

A2A payments typically support digital wallets, QR code-based payments and online purchases. Digital wallets usage has soared since the onset of the COVID-19 pandemic. Last year, their use, globally, exceeded in-store cash usage for the first time, according to WorldPay's Global Payments Report. By 2024, digital wallets are expected to account for a third (33 percent) of all in-store payments; in the United States, it will be closer to 16 percent, WorldPay predicted.

Juniper Research expects the number of digital wallet users worldwide to grow from 2.6 billion in 2020 to 4.4 billion in 2025.

Plaid won't be involved directly in the movement of funds through its ecosystem. Rather, it's relying on partnerships with 50 payments and technology companies across the United States and Europe, Williamson said. U.S. partners include Checkout.com, Dwolla, Galileo, Global Payments, Silicon Valley Bank and Square. To combat fraud, secure token exchanges will allow businesses to verify customer identities, Williamson noted.

Improving a clunky process

"With an ecosystem of partners focused on simplifying account-based payments, Plaid can provide flexible options for any company to make bank payments an option in their checkout flows," Williamson wrote. "Leveraging the power of Plaid and our partners' payment providers can save businesses significant money and time."

Tracy Meng, vice president of partnerships at Checkout.com, said, "Many of the fastest-growing fintechs globally are powered by Plaid and Checkout.com's best-in-class APIs. Our partnership will connect Plaid's account verification and Checkout.com's payment services to make account funding accessible, seamless and secure for fintechs and merchants alike."

A2A payments have been available for decades, but are generally considered clunkier then credit and debit card payments—and even checks. "Integrating Plaid's technology within payment providers' platform improves the often clunky and often outdated bank account payment user experiences, eliminating the need for typing in account numbers. For consumers on the end of these payment journeys, that means bank payments are an easier, faster and a more secure option than ever before," Williamson wrote.

Looking ahead, Williamson said Plaid's ecosystem will evolve to meet the full potential of account-based payments. "Account-based payments aren't new, but the industry is far from realizing their full potential," he wrote. "Plaid is building an account-based payments ecosystem as flexible and fluid as this burgeoning opportunity: as technology and consumer adoption evolve, so will Plaid and our partner ecosystem." end of article

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