What Is Plaid and Why Is It Important in Banking

by Kenneth Medford

I’ll be 100% honest with you; modern technology is all witchcraft to me. The idea that data is floating around my head 24/7 is a concept I can’t wrap my head around. Attempting to understand it would keep me awake at night (and I LOVE my beauty sleep)!

I understand that there is a myriad of dangers out there in internet land, and there are some stand-up individuals and companies that work to protect us. Mainly from the bad people and things that lurk in the interwebs. 

That’s why companies like Plaid are so crucial to maintaining a proper financial mindset and banking in this digital age. If you’re like me, though, it’s probably a bit difficult to understand how. 

Well, take this walk with me. I’ll show you what I’ve learned about how Plaid works, why they even need to exist, and how they handle your ever-precious data.

How It Works

So, how exactly does this magical protection spell work? Plaid acts as a security shield between you and whatever financial app (Nav.it) you want to use. Let’s say, for instance, you want to use Venmo for sending and/or receiving money. Plaid plays the bridge between them and your bank account, so no one place has ALL your data.

Your username and password for your bank aren’t shared with the financial app! That way, no one can backdoor their way to your money if things go left. Plaid is audited by 3rd party researchers, financial institutions, and app developers just to make sure everything is on the up and up. My favorite part of all of this: the bug bounty system. Any old Joe happens to find a bug in the Plaid API (application programming interface), you can turn in your findings for a bounty (now that’s keeping a money mindset). They actively encourage people to try to find flaws because they’re so confident in their product. That’s the kind of swag I want to see out of someone watching my money.

What does this all mean for you? It means that you can focus on your financial mindset instead of cybersecurity. You can feel safe using Venmo, Acorns, Nav.It and more to help you organize your money and keep a close eye on how it’s moving. As we all know, keeping tabs on how your money is being spent is a core tenant of maintaining a reasonable budget. Plaid’s level of security allows you to put down the pen and pad and monitor it all in real-time.

Why They’re Even Here

“But can’t my financial app just connect directly to my bank? Why do we have to get another company involved?” I hear you asking, earnestly confused but trusting that I will have the answer. Well, thank you for your good faith, for I do have the answer you seek. 

The issue here lies with how different companies structure their data. Bank A may do things one way, App A another. Now take that idea and consider the over 10,000 various financial institutions that need to connect to the ever-rising number of financial apps. It’s simply not feasible for them to have the security they need AND be plug-n-play with such various applications. 

Come on, we can’t even get universal chargers for our cell phones or electric vehicles, which is almost as important. That’s why a company like Plaid is so essential. They can dedicate their time and resources to being the “adaptor” between the banks and your favorite app. This allows the banks to do what they do and the app to focus on new ways to make your experience the best possible. 

This is just another benefit for you. Behind your tiny black mirror, you get a team of tech wizards dedicated to making sure you can take control of your financial mindset while being safeguarded from the dark side of the web. These connections give you the most accurate numbers, allowing you to exercise the principles of cash flow basics, so you can better plan your next moves without having to jump back and forth between multiple platforms. Bridge programs like Plaid make what usually is exhaustively stressful, super easy, barely an inconvenience. #RyanGeorgeVoice

How They Handle Data

Well, this is it, isn’t it? With eyes on social media and how they use our data, consumers are ever concerned with how companies handle their data. Plaid is all about security first. Their data encryption is two-fold, with TLS (Transport Layer Security) to protect information as it travels between servers and AES (Advanced Encryption Standard 256) for any data that needs to be stored for any period of time. Even IF their system is compromised, actually retrieving your data would be a Swordfish level task. For those who don’t know that movie, just know it will be really, REALLY hard (but you should totally see that movie. John Travolta, Hugh Jackman, Halle Berry, and Don Cheadle .it’s pretty dope). 

Layered on top of that is Multi-Factor Authentication (MFA), which gives more profound protection beyond just your username and password to lock out unauthorized access. Their partnership with cloud computing companies adds yet another layer of 3rd party security. The Plaid API and its related components are all cloud-hosted, which essentially means you’d have to go through two companies worth of defenses to even have a shot at someone’s info. I legit imagine Plaid’s security having more levels than a Dragon Ball Z villain has transformations.

This is more of the techy side of it, but this just goes to illustrate my earlier point: you focus on your money, they’ll handle the rest. You can feel confident that as you utilize these various apps to exercise and improve your money mindset, no weapon formed against your stacks shall prosper. In uncertain times like these, finding security anywhere provides peace of mind that is in short supply especially in terms of finances.

What’s it all mean?

It means fintech’s like Nav.it can help users better access financial services. From lower fees and better rates to access to credit and loans, Plaid delivers an effortless interface to connect financial transactions from a user-friendly dashboard focused on offering exceptional services. 

It means Plaid is at the heart of cash flow basics (the total amount of money transferred into and out of a business, primarily affecting liquidity). Any blind spot in your financial vision means you can’t possibly make the best decisions for you and your business. Having this type of secure connection to your financial institutions will give you the whole 360° perspective you need to eliminate as many variables as you possibly can.

Let me put it in an even simpler way; close your eyes and think of your favorite brand. You know if you see their name, you’re getting quality, you’re getting the most bang for your buck, and you know you don’t have to question anything about what you’re getting. Next time you find a finance app and see Plaid come up, you should have the same warm and fuzzies. Consider them a stamp of approval on places you can feel safe getting your swole on with a little financial fitness. Maintaining a good budget, investing, saving, and donating all powered by Plaid. Isn’t that nice of them?

Auto-saves from Nav.it help our nav.igators automate their savings to reach goals.

Now that you have Plaid’s basics down, it’s time to create an Auto Save to reach your financial goals. Whether you need cash for a post-‘rona trip, a new puppy, or the expense of moving to chase your dream job, auto-saves makes it easy by automating savings. Simply specify how much money you want to save and the frequency it should be drawn from an account of your choosing. Your savings stash is available for withdrawal at any time, and you can save for as many goals as you want!

We think the power of intention improves our financial health. We also think that empowering your money mindset improves your ability to earn and allocate dollars for the things that bring you joy. “Splurging” on a trip, clothes, or art supplies isn’t impractical if it brings you closer with the people you care about, encourages confidence, or brings you mental zen. You don’t need to live in austerity to improve your financial outcomes. Budgeting can ensure that you can buy the things that improve your outlook and experience when it counts. Auto-saves helps you save for those experiences.

Related Reads

Get Your Financial Life Together

Five Money Myths Holding You


Writer, rhymer, gamer: the easiest way to define the man known as Kenneth Medford. I’m a simple man who loves to learn and loves to help and I wander the digital world trying to find ways to sate my hunger for both. Basically, I’m Galactus but helpful.

Check out my other work here or reach out to me on LinkedIn.

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