The joke on the campus was that VISA stood for "Very Inconspicuous Spy Agency".
You'd think that there wouldn't be this kind of miscommunication in the chain of command.
All jokes aside, I'm very curious to check out Plaid now because I didn't pay attention when it was independent and Visa is a *very* smart organization, so Plaid must be something special.
It's not so much that Plaid is "something special" but that US banks are stuck in the 1950's technologically.
Plaid shouldn't exist. It only exists because banks refuse to create open APIs for others to integrate with.
With that said, Plaid has done a fantastic job.
Plaid works by asking the user to give their banking username and password to Plaid, and then their two factor authentication token too. Plaid logs into their account behind the scenes to verify ownership.
Plaid claims to not store this info, and I assume that they don't, but it still seems like one of the biggest security anti-patterns ever. If nothing else, it's training users to ignore the "don't share your password" warnings. Do we really want users trained to be more susceptible to phishing?
Think of it as Plaid storing OAuth2 access tokens, sort of; and the tokens do expire (over pretty long periods), though, some bank integrations do allow them to generate their equivalent of refresh tokens.
Plaid didn't go into this blind; they know the tightrope they're walking. As someone who's worked with Plaid to build an integration into our product, I'd say they're definitely in a very gray area, but that's pretty much all of the Fintech space right now.
Although, I'd also say they're not malicious; even if it is just motivated by the fear of the bad press resulting in a customer exodus.
Mostly true, but both Capital One and Citibank have OAuth APIs. It's lovely.
https://www.nacha.org/content/available-apis https://www.nacha.org/content/phixius
Bottom line: Fednow may be too little too late
Pretty wild it even exists
Europe mandated this functionality (PSD2) [3]. With instant payments and if regulations required banks to offer this functionality, Plaid's value would evaporate.
[1] https://www.frbservices.org/financial-services/fednow/index....
[2] https://www.paymentsjournal.com/timeline-the-feds-real-time-...
[3] https://en.wikipedia.org/wiki/Payment_Services_Directive
It would appear that FedNow solves for "How do I get money into my Schwab brokerage account?" but not "How can I let Schwab do risk analysis across all my investment accounts?"
Baby steps!
VISA/MC are aware of this. They expect "Interchange compression" i.e. reduction in revenue from Credit Card fees as users switch to other systems. However it isn't a show stopper because in parallel they have discovered (and are using ) new ways to increase interchange revenue e.g. Virtual Cards, Prepaid Cards etc.
Agree on interchange compression (it's fairly obvious credit card networks are overpaid for what they offer, so of course innovation is going to bring revenue destruction), but there's no way virtual and prepaid cards are going to make up the shortfall (especially with Congress starting to lean left and progressive banking policies on the table, such as central bank pass through accounts, negating the need for prepaid cards when deposit accounts become accessible to everyone).
Long story short, finance still consumes too much of a percentage of GDP, and it's a good thing when tech comes along that pushes that drag down.