Apr 8, 2021

US fintech Plaid raises $425m in Series D funding round

Plaid
venturecapital
investment
Fintech
Joanna England
3 min
US fintech Plaid raises $425m in Series D funding round
The new capital more than doubles the total amount Plaid has raised since it’s 2012 launch...

The US-based unicorn startup, Plaid, has more than doubled its total capital following a Series D funding round of $425m.

Plaid is a financial services company based in San Francisco, California. The fintech builds a data transfer networks that empower financial and digital finance products. Plaid's cutting-edge technology platform links financial data from customer accounts to apps such as Coinbase, Expensify and Venmo, to enable better money management.

According to reports, Plaid's technology platform connects information from 11,000 banks and financial institutions to more than 4,500 fintech customers. These include Robinhood, Google, Microsoft and PayPal.  

The new injection of capital will be used to expand Plaid’s current services. The company also aims to create a ‘single, integrated platform’ that is specialised in assisting developers who are creating digital financial products.

The investment follows on from an attempt by Visa to acquire the fintech company last year. The payments giant made an offer of $5.3bn for Plaid, but the deal collapsed following a legal challenge by the US department of Justice in January. When the acquitision was halted due to regulatory scrutiny, the general expert concencsus was that Plaid's value was much higher than Visa's offering. This position turned out to be accurate as Plaid has since then doubled its valuation - and is now worth an estimated $13.4bn.

Plaid’s pandemic growth

The year-long COVID-19 pandemic has been instrumental in Plaid’s significant growth spurt. The global lockdowns have resulted in users relying far more heavily on digital financial services and tools, not only to manage their finances but to buy and sell investments and stocks. The increased activity on the Plaid platform logged a massive 44% more users between March and May 2020, than in the same period in 2019. 

Zach Perret, Plaid’s CEO and co-founder, told CNN, " A decade of gradual digitisation was punctuated by a year of sudden adoption. Mobile banking is no longer the realm of startups, but rather the norm for main street banks. Not only have most of our financial interactions moved to the web, but the number of people that have access to high-quality financial products has massively increased."

Plaid’s expansion strategy

Head-quartered in San Francisco, Plaid currently has plans to expand its employee headcount by up to 50%. The fintech has 700 staff registered at its offices in London, Amsterdam, New York, Salt Lake City and Washington. Reports suggest that a European sector expansion plan is on the cards, with rumours that the Amsterdam operation may triple in size by the end of 2021.

The company’s long-term investors include Goldman Sachs, Visa and a16z. But the new capital in the recent Series D round has been provided by Ribbit Capital, Silver Lake Partners, Altimeter Capital and others. 

Perret added, "In founding Plaid nearly a decade ago, we dreamt of a financial system that was built to empower consumers and unlock financial freedom for everyone. We are humbled to watch as fintech continues to expand and improve the financial lives of billions of people worldwide."

* Image credit: Plaid

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Jun 10, 2021

FIVE things fintechs must do to keep investors onboard

Fintech
Investment
venturecapital
AI
Brandon Rembe, CPO, Envestnet...
4 min
Fintech innovations drew in first-time investors who reshaped the markets. What new advancements will help them continue their rise?

New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.

Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?

The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.

Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.

Equal access to financial wellness education

Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.

The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.

More personalisation

Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.

For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.

Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.

The rise of AI-Powered Advice

Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?

Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs. 

Focus on financial mental health

New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.

It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.

Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.

Gamification for good

The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.

Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.

Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.

The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.

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