If you’ve ever connected your bank account to a mobile app, you’ve probably used Plaid. So what is Plaid? You can think of it as the plumbing for all the apps that we use today.
Instead of your apps directly connecting to each bank’s API, they connect to Plaid instead. Plaid then acts as an intermediary between banks and financial apps, using either your bank credentials or a security identifier to authenticate your information.
This means that Plaid has aggregated the financial information of millions of people. This sounds alarming, to say the least, and it begs the question, ‘Is it safe?’
Is Plaid Safe?
In terms of security and encryption protocols, Plaid uses Advanced Encryption Standard (AES 256) and Transport Layer Security (TLS). Plaid is also certified in the following standards: ISO 27001, ISO 27701, and SSAE18 SOC 2.
At the time of writing, Plaid hasn’t suffered from any major security breaches. So in this regard, Plaid is considered safe to use.
However, Plaid had to settle for $58 million on July 20, 2022, over allegations of privacy rights violations. So in terms of data privacy, Plaid isn’t bulletproof.
Does Plaid Have Access to My Bank Credentials?
Yes, some financial institutions allow Plaid to have access to your credentials. However, Plaid does not share your credentials with your apps. Only the requested financial information is sent to the apps or services you’ve connected.
Not all financial institutions give Plaid access to your credentials, however. Some banks require you to log in with your credentials once, and then they’ll provide Plaid with a type of security identifier upon successful authentication. Plaid uses this security identifier instead of your login credentials to authenticate your information.
Why do Apps Use Plaid?
In an ideal world, financial institutions will employ Application Programming Interfaces (APIs) that follow the same international standards. The EU has made strides towards this goal.
Unfortunately, API integration to a single bank in the US is already a daunting task due to varying API specifications. So doing this thousands of times is not feasible for most companies.
So instead of investing time, effort, and engineering expertise into the creation of thousands of digital connections to financial institutions that may or may not be used by their users, most companies just use Plaid.
Does Plaid Sell My Data?
Plaid states they don’t sell or rent your data to other companies. They handle your financial data by collecting it and securely sharing it with the apps and services that you connect to Plaid.
How Does Plaid Make Money?
Plaid makes money from the financial apps and services that build unique integrations to its API. They charge a variety of fees to these apps for connecting and using their services.
How Can I Manage My Plaid Connections?
You can manage which financial accounts are connected to specific apps and services through the Plaid Portal.
Which Banks Use Plaid?
Over 12,000 financial institutions use Plaid, which is a bit too many to list in this article. You can, however, search for specific banks on Plaid’s Institutions Page.
Which Apps Use Plaid?
More than 8,000 financial apps and services use Plaid. Unfortunately, there is no comprehensive list for this. There is a list of the most prominent apps that use Plaid on this Discover Apps Page.
Summary
Plaid is relatively safe when it comes to security and encryption protocols. It’s certified in the following standards: ISO 27001, ISO 27701, SSAE18 SOC 2, and its security hasn’t been breached at the time of writing.
However, Plaid had to settle for $58 million on July 20, 2022, over allegations of privacy rights violations. So in terms of data privacy, Plaid isn’t bulletproof.
But with 12,000 financial institutions and 8,000 financial apps using Plaid, it’s difficult to avoid using it. That is until Open Banking Standards finally take root in the US.
