Plaid, a company working to connect consumer bank accounts to services like Venmo, Robinhood, Coinbase and more, owes lots of people money as part of a multimillion-dollar lawsuit, Engadget reported Monday (Jan. 24).
The lawsuit says Plaid collected more financial data than it needed from users, and received users’ bank login information through its own Plaid Link interface — which has the look and feel of a user’s own bank account login.
Plaid, in response to the lawsuit, has denied wrongdoing, but it will pay $58 million to all consumers that have a bank account linked to any of the 5,000 client apps it has, according to the settlement website.
In a statement emailed to PYMNTS Tuesday afternoon, a Plaid spokesperson denied selling data and added consumers have control over sharing their data:
“The claims raised in the lawsuit do not reflect our practices. We help consumers safely connect their financial accounts to the apps and services they rely on. As Plaid has evolved from backend infrastructure for developers to also providing front-end solutions, we have become an industry leader in consumer privacy practices. We do not, nor have we ever, sold data. We make our role and practices clear, and provide services that give consumers control over how and where they share their data. We believe settlement of this matter is best in light of the cost and burden associated with protracted litigation. Moving forward, we will continue to focus on empowering millions of people with control over the data they share across the thousands of applications Plaid supports.”
Per the report, Plaid has also changed a few of its policies and business practices in light of the lawsuit.
There are enough people using Plaid that a payout might be “pretty slim,” though Engadget notes that those who are U.S. residents with bank accounts might qualify if they were connected to the app between Jan. 1, 2013 and Nov. 19, 2021.
PYMNTS wrote that Plaid also recently bought Cognito, an identity verification and compliance service.
See also: Plaid Buys ID Verifier Cognito
Cognito’s platform has automatic identity verification tech and know your customer (KYC) and anti-money laundering (AML) screening, which can help onboard customers and cut down on fraud.
The CEO of Cognito, Alan Meier, wrote that Plaid Link is “nearly ubiquitous” across the FinTech ecosystem and does “a fantastic job” abstracting the thousands of banking providers the companies need to support.
“The identity and compliance story that immediately follows connecting a bank account is still, comparatively, quite fragmented and home rolled,” Meier wrote.
Meanwhile, in a blog post, Plaid said the “next major step” for the company would consist of helping developers build the best, most seamless onboarding experiences. The blog said this would come with simpler consumer journeys, including things like sending money to a friend, as well as trading stocks or cryptocurrencies.
While the terms of the deal weren’t disclosed, a report said the price tag sat at around $250 million.
FAQs
Due to a class action lawsuit, Plaid might owe you settlement money if you use any of these banking or financial apps. The company recently settled a class action lawsuit requiring it to pay $58 million to consumers, which include Venmo, Robinhood, and Coinbase users. Plaid is ubiquitous—and not just in winter.
Why is Venmo forcing me to use Plaid? ›
Venmo uses Plaid to verify your bank account information and, periodically, your bank account balance to check if you have enough funds to cover certain transactions.
Is it safe to use Plaid on Robinhood? ›
Why does Robinhood need my bank password? Robinhood uses Plaid to allow its users to link their bank accounts to the app. Robinhood doesn't get this information. It goes only to Plaid, which is a financial intermediary with a good reputation for security.
Is Plaid safe for Venmo? ›
Yes, it's OK to provide your bank login information to Plaid! Plaid uses very high quality security protocols to keep your information safe and secure. It instantly encrypts sensitive data once it is shared and only uses secure connections with the apps it's integrating with.
Should I let Plaid access my bank account? ›
Plaid uses the highest levels of security possible to keep your information safe. When you link your checking account with a financial application through Plaid, the company instantly encrypts sensitive data and shares it with the application using a secure connection.
Can you bypass Plaid on Venmo? ›
If you can't use Plaid for any reason, you can still link an account to Venmo manually. Here's how: Select Manual Verification instead of Instant Verification when prompted. Enter your account and routing number, following the onscreen prompts.
How do I remove Plaid from my bank account? ›
Disconnect your bank account from Plaid
When on the Banking page, look for the bank account you are trying to disconnect and click the three dots on the right of the line item. Select Disconnect Bank.
How to link bank to Robinhood without Plaid? ›
To link a major bank in your iOS or Android app:
- Select Account (person icon) → Menu (3 bars)
- Select Transfers → Linked Accounts → Add account.
- Choose your bank from the list of major banks, or use the search bar to search for your bank.
- Enter your online banking username and password.
How do I disconnect my financial accounts from an app?
- Log in to your Plaid Portal account.
- From the Overview tab click the name of the app or service.
- Scroll down to Manage connections.
- Select Disconnect app.
- Review the information about what happens when you disconnect a financial institution from an app.
Plaid does not charge consumers for using our services.
Venmo uses Plaid to instantly verify your bank account information. By entering your username and password for your online banking portal, Plaid is able to let Venmo know your essential details -- your bank account number and routing number -- to let you send and receive money.
Is it safe to connect your bank account to Venmo? ›
Linking bank accounts to Venmo is generally safe, but not without risks. You should implement extra security measures when linking bank accounts or credit cards to Venmo, such as setting up multi-factor authentication on both your Venmo app and your online bank accounts.
What banks are using Plaid? ›
Widely used banks that use our instant bank linking system (Plaid) Chase, Bank of America, Wells Fargo, Citi, US Bank, USAA, Fidelity, PNC, Capital One, TD Bank, SunTrust, Navy Federal, BB&T, etc.
Can Plaid withdraw money? ›
You can use the Plaid Dashboard to manually trigger a deposit or withdrawal. Withdrawals will push the funds to your business checking account in the next same-day ACH window.
How long does it take Plaid to verify your bank account? ›
Plaid will make a single micro-deposit and then automatically verify it within one to two business days.
Does Zelle use Plaid? ›
Plaid takes your account information, encrypts it, and then gives it to apps like Zelle and Cashapp so you can easily make transactions or view account information.
Why is Venmo telling me to update my bank? ›
There are a few reasons why you might see this error message. You recently changed your banking information. If you've made any changes to your account number, routing number, or online banking password, you'll need to delete your bank account from Venmo and add it back again.
Why does Plaid keep saying action required? ›
If you see this error message, there may be some steps you need to take before you can connect your financial account via Plaid successfully. Some financial institutions require you to take specific steps to enable your accounts to be linked to third-parties like Plaid.
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