Over the past several years, there’s been a staggering amount of innovation in financial services. Now, we’re starting to see the fintech ecosystem begin to take shape, bringing together startups, established financial institutions, technology platforms, policymakers, and regulators. It’s this spirit of collaboration that will accelerate progress even further.
While financial technology startups tend to get a lot of attention, fintech isn’t just about them—it’s about the ecosystem as a whole. We can’t forget that established financial institutions continue to act as the main financial hub for many people and businesses. Which means that it’s the banks that are really providing the bedrock upon which all this innovation sits.
Today, it’s easier than ever for new entrants to build upon that foundation—in large part, we think, thanks to the improved data layer we’re building here at Plaid. Stronger data infrastructure, which makes the interaction between the application layer and the processor layer, has meaningfully lowered the barriers to entry to financial services.
These dynamics—and rapid changes—have naturally led to questions about the best path forward. As the ecosystem has evolved, it’s become clear that the answer lies in collaboration among all stakeholders. That collaboration is already underway.
The White House FinTech Summit, which we participated in on June 10, demonstrated the government’s commitment to developing stronger partnerships with innovators to provide consumers with better choices (and drive certain economic objectives).
As Adrienne Harris, special assistant to the president for economic policy, wrote in a blog post after the summit: “Technology isn’t just changing the financial services industry, it’s changing the way consumers and business owners relate to their finances, and the way institutions function in our financial system.”
This adaptability in the way institutions function and collaborate means that innovation actually has the potential to improve the financial lives of millions.
There’s still a lot of work to do: While we were excited to represent Plaid (and, perhaps by extension, the thousands of developers on our platform) at the summit, there were no engineers or people focused on security in attendance. Making these forums more inclusive will go a long way to making the industry as a whole more inclusive. To Harris’s point, technology is transforming financial services—so including the perspective of developers and technical experts is essential.
More concretely, the work we’ve been doing as a member of Federal Reserve Bank of Kansas City’s Secure Payments Task Force is focused on finding ways to safely implement faster payments in the United States, as it outlined in a January 2015 paper. Our experience tokenizing ACH end-to-end for the first time, through our partnership with processor Stripe, is also especially relevant to our role on a NACHA working group focused on improving ACH payments. Speeding up payments in a way that limits fraud and is secure is a huge focus of ours at Plaid, given our role as a gatekeeper in the ecosystem. And we know we can’t effectively go it alone, either.
So while the narrative of years past has focused on purported tension between banks and fintech startups, that’s faded. Banks aren’t being disintermediated (though, it’s true, in some cases, they’re competing harder on certain non-core services). Instead, they’re being transformed into platforms, into which consumers plug all sorts of additional services they want and need. Plaid brokers those kinds of connections, making it easy for consumers to permission new services regardless of where they bank.
Financial institutions and newer fintech companies actually have more in common than not. We all want to improve financial futures for consumers and businesses, and to back those innovations with the best security possible. It’s clearer than ever that these goals are best achieved through partnership—which is why it’s great to see all these opportunities for collaboration cropping up.