What Is Plaid? And How Can You Use It To Verify Payments?
If you’ve ever used a payment processing platform, you may have heard of Plaid.
Most business owners know Plaid as something involved in the transfer of money…somehow. But what is Plaid, and how does it work for payment verification?
Here’s what you need to know.
What is Plaid?
Plaid is a fintech company that acts as an intermediary between financial services apps and a user’s bank or credit card provider.
However, the most important thing to know about Plaid is that it does not move money.
Instead, Plaid has about 11,000 bank partnerships. This makes it possible for merchants to use Plaid to receive verified ACH payments for business.
The process is simple: clients connect their bank accounts to Plaid, and Plaid verifies the client’s banking information before a transaction occurs.
During said financial transaction, Plaid communicates with banks to encrypt user information and keep bank and login information secure and private.
Because Plaid doesn’t move money, it requires the partnership of a payment processor like Venmo or Paynote to transfer funds.
How do you Use Plaid?
Here’s an example of how you could use Plaid to start accepting verified payments:
- Set up a Merchant account with Paynote (verified ACH)
- Send an invoice / payment link to your client or integrate with Paynote Checkout JS
- When your customer accepts the payment they will be prompted to connect their bank account via Plaid
- The customer will enter their Online Banking credentials (username / password)
- Plaid keeps sensitive information secure and contacts your credit card processor or financial institution to verify the information.
- Once Plaid has verified and authenticated your customer and their bank information, the connection between their bank and your app is in place, which means you can debit their bank account
Is Plaid Safe to Use?
Yes - Plaid is very safe to use.
Plaid deploys a variety of encryption protocols, including the Advanced Encryption Standard (AES 256) and Transport Layer Security (TLS), to transmit financial data.
Plaid also follows these security protocols:
- Multi-Factor authentication (MFA) to secure your account even if your bank doesn’t offer it.
- A “bug bounty program,” which increases the focus on security at Plaid.
- A promise to never share consumer data without permission and to never sell private information to other companies.
- Allows clients to have control over which companies have access to data and what kind of data each company sees or receives.
Since Plaid uses some of the best encryption protocols available in the industry, users can complete transactions through Plaid and feel confident in the safety and security of their financial transactions.
Who Should Use Plaid?
If you’re using a financial app, it should be backed by Plaid.
Paynote, for example, uses Plaid to verify financial transactions. This is a massive perk for merchants in high-risk industries because it drastically reduces the risk of returns, chargebacks, fraud, and other frustrating financial situations.
At the end of the day, financial information is too sensitive to trust to just anyone, and you should always make sure that the financial apps you’re using are backed by Plaid, which offers best-in-class encryption and security for your peace of mind.