Recent product news from Stripe and Plaid indicate the two private companies are gunning for one another as the market for B2B financial technology matures, expands and individual players increasingly overlap.
It might sound silly that Stripe, best known for its payments technology, and Plaid, best known for its API that connects consumer bank accounts to third-party services, are competing. It is not.
The quote, “All software tastes like chicken from a financial perspective” is both funny and true. It’s also largely true for fintech companies, but for a reason unique to the space: Fintech startups, unicorns and even public companies tend to broaden their capabilities over time, adding more and more competencies.
Both B2B and B2C startups have similar motives. Customer acquisition (advertising, onboarding, etc.) is expensive and competitive, so once a fintech lands a user or customer, it’s best to extract as much value from them as possible. That’s why companies like Plaid and Stripe build and buy to serve more and more of their customers’ needs – until they wind up at each other’s doorstep.
What happens once they do? We’re going to find out.
Recent skirmishes from the Great Fintech War
In January 2022, Plaid announced that it was buying Cognito, a decision that TechCrunch wrote was part of a move “beyond merely connecting accounts.” In essence, Cognito added know-your-customer (KYC) and anti-fraud tools to Plaid’s feature list. By doing so, it could offer its customers far more than just account connections.
In 2021, Plaid had bought a company called Flannel that focused on payments. With account connections, security tooling and payments tech, Plaid was building and buying its way into a larger potential total addressable market – one that’s already being attacked by other private fintechs.
It’s obvious that Stripe has broadened its feature set away from its original remit. The company has so many services that its on-site menus are becoming more of a catalog than an organizational tool. Seeing the company launching something new here and there, then, is nothing out of the ordinary.
But in early May, when Stripe announced “Financial Connections,” a service that will, TechCrunch wrote, let its “customers connect directly to their customers’ bank accounts to access financial data to speed up or run certain kinds of transactions,” we took note.
The product announcement put Stripe on a collision course with Plaid’s core business, even if it was fair play – the latter company had already told the market that payments were on its mind through the 2021 Flannel deal.
Still, Plaid clearly took exception with what its leaders implied was a sneaky means of acquiring information and a lack of transparency on Stripe’s part in light of their partnership and history.
With the two companies fussing at one another on Twitter, it was clear that the gloves, as much as they can be in the API world, were off.