Fintech companies are seeing the value in payments collaboration, making payment capabilities more accessible through the latest technological innovations.
This type of collaboration has worked well for Amazon Web Services (AWS) and Plaid. In a recent conversation, Mark Smith, Head of Payments Business and Market Development at AWS, John Anderson, Head of Payments at Plaid, and Tim Sloane, Vice President of Payments Innovation at Mercator Advisory Group, discuss how AWS and Plaid are working to democratize payments for all.
For nearly a decade, Plaid has been delivering account connectivity to its customers by securely connecting a preferred app with their bank account. That ultimately translates to as many as 12,000 bank connections.
“[Many] Americans and people in Europe are using Plaid to get access to products — from financial services including Robinhood to moving money like they would with Venmo,” said Anderson. “Oftentimes, our customers will use Plaid to connect [their] bank account and then use that connection to allow people to fund an account balance. That aspect has really taken off and started to grow.”
“There’s this interesting commonality between [Plaid and AWS],” said Anderson. “Both of us are democratizing super powerful capabilities and then opening that up to a vast ecosystem — from startups to Fortune 1000 companies.”
AWS’ Smith also agrees that there’s a big focus on democratizing payments, as well as a focus on developers and engineers. “We really try to help customers all over the world democratize things like artificial intelligence [AI] and machine learning [ML],” he said. “[You want to] make it easy and not have to have a team of data scientists to build, deploy, and improve their use of machine learning for various things around payments.”
“We see a lot around fraud prevention and credit extensions, but there’s just a ton of use cases and a ton of customers who have been able to benefit from it,” he added.
On the topic of collaboration, Smith noted it’s important for teams to figure out how to best collaborate when there are shared customers and shared partners. “How can we come together as an ecosystem and change the face of the industry together? And that’s just a couple of ways that we’ve been working together with Plaid,” he said.
Harnessing Data and Analytics to Create Impactful Customer Experiences
There’s been a lot of acceleration in the payments space, especially since the onset of the pandemic in 2020. As a result, companies and their partners are redirecting their focus on the end customer experience.
“We’ve been helping customers, from enabling new forms of payment to lowering cost payments,” said Smith. “Customers like Plaid are using all the data that comes along with the accounts and payment transactions to reduce fraud and false positives to create a good customer experience. And more companies are turning to AI/ML to manage the high volumes of data and provide valuable real-time insights and constantly improve these models to stay ahead of fraudsters.”
Payments are also becoming more contextual — this includes embedded finance, opening up new payment methods, or opening up credit at the point of purchase. “We’re seeing some savvy customers use modern data analytics to ensure that they’re targeting the right customers, at the right time, in the right channel, with the right product,” said Smith.
Digital Payments: New Use Cases
Anderson has personally seen a broad evolution of more internet-native capabilities and services working together to help people through a recent experience he had. “I’m trying to buy a car and prices have gotten really expensive,” he said. “I love to buy used cars and if I was going to Craigslist, or find[ing] someone to buy a car [from], I’m not going to show up with $10,000 or $20,000 in my pocket.”
“It gets really tricky, and I don’t even know if people still have money orders today,” he said. “You have these amazing products, like Carvana, who makes that shopping experience easier in terms of browsing online. But a huge piece of it is how they’ve been able to aid the actual transaction and the payment layer.”
According to Anderson, Carvana also use KYC (Know Your Customer) information for verification and to ensure a safe marketplace. This enables customers to move their money safely and efficiently in order to purchase a vehicle.
Anderson also detailed Plaid’s newest products: Signal and Transfer. Signal sees the patterns within the customer’s transactions, offering an opportunity to predict returns. This can be due to insufficient funds or customer-generated concerns. “We can then establish a very confident transaction connection through Signal, and then the last piece is actually moving in the money.” said Anderson.
And for companies and developers that have never initiated an automated clearing house (ACH) payment, there is a product called Transfer. Transfer facilitates the onboarding onto Plaid — the connection, security, and authorization in order to move and settle funds.
Putting the Choice in Consumers’ Hand
Another shared philosophy both AWS and Plaid share is giving the customer a choice. Neither company dictates to its customers what partners they must work with. “What’s best for the customer is our focus,” said Smith. “Whenever possible, if they have a choice, you give them that choice.”
Indeed, many customers show up with certain needs as to how they choose to move their money and which specialized processing partners they prefer to work with. Plaid believes in having a deep integration with all partners to enable these connections to be safe and secure. What’s more, every vertical has its own needs. By catering to these needs, fintechs will be able to serve more customers.
“By delivering APIs [application programming interfaces] to make this all possible, it allows you to find the fintechs that are vertically oriented, that can modify the payment structure in order to be able to meet the specific needs of that particular vertical market or customer base,” said Sloane. “Each vertical has its own particular needs.”