From Partners to Competitors: What Stripe’s Latest Move Means for Plaid

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Earlier today, the payment giant Strip announced a new product that fills in some significant gaps in its game to be a financial services layer for merchants and other businesses whose models are based on transaction permission, as reported by Ingrid Lunden of TC.

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This new product is called Financial connections and the company says it will give Stripe customers the ability to directly connect to their customers’ bank accounts to access financial data to speed up or complete certain types of transactions.

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If this sounds familiar, it’s because it’s pretty much the same thing that another fintech giant, Plaid, is already doing. And this move by Stripe directly positions the company against Plaid, a former partner.

A quick note for strangers: Stripe cost $95 billion a year ago and now reportedly approaching an IPO. Founded in 2010 by John Collison (President) and his brother Patrick Collison (CEO), Stripe saw the value of creating an easy way for developers to integrate payments into any app or site with a few lines of code at a time. when digital and especially online payments began to gain momentum.

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Plaidwhich, as mentioned above, helps connect consumer bank accounts to financial apps, in April 2021. Series D worth $425 million at a $13.4 billion valuation. The nine-year-old company made headlines last year when its $5.3 billion acquisition of consumer finance giant Visa fell through due to regulatory troubles — an event that many say , turned out to be a blessing in disguise for the run.

The tension right now is that some people, including Plaid CEO and co-founder Zachary Perret, believe that Stripe may have used its relationship with Plaid to gather information on how to build this kind of product.

Both Plaid and Stripe declined to comment on this topic.

But in tweet in response to Stripe PM Jay Shah’s own statement tweet of his company’s new product, Perret wrote:Wow! Jay, you’ve interviewed Plaid several times over the past few years and asked leading questions, and your team has repeatedly sent us RFPs (under NDA!) asking for tons of detailed data. I wish you all the best with these products, but it’s amazing to see the methods.”

Interestingly, Stripe’s new product is based on Plaid’s competitors MX and Finicity. While some may argue that Plaid does not own the open banking market, others seem to be more upset by the fact that Stripe may not have been transparent with Plaid about their intentions.

And while Perret doesn’t speak to the media, he is quite articulate. in hacker news about the differences between Plaid’s offering and what Stripe just released. In this exchange, he goes back and forth with “Edwin” from Stripe on various aspects of what the two companies do.

The news probably won’t shock either Perret or Plaid, because on March 29 he quoted Patrick Collison’s March 29 tweet about Stripe’s launch of its first ACH support product, saying only that it was “cool” to see the company’s announcement and that there was “a lot to come.” These updates to the Stripe ACH Debit product were a nod to today’s news given that it was launched with the ability to instantly verify bank accounts, a feature that competes with the Plaid Auth product.

Given this, both companies were once partners. The Plaid website has details of the partnership between the two companies. “Offer frictionless money transfers without ever having to process an account or routing number.” The language said:

Use Plaid Link to instantly authenticate your customer account and automatically create Stripe bank account token so you can accept ACH payments through them API AKP. This guide is for those who already have an ACH enabled account with both Stripe and Plaid. If it’s not you, go to Stripe ACH Documents to start. From there, you will be able to sign up for a Plaid account.

There is no word on whether this partnership exists. But in light of today’s news, even if that’s technically still the case, his future looks precarious.

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