In this article, we’re answering “Is Plaid safe?” The short answer is “yes”.
But, it’s important to consider the specific encryption, authentication, and auditing practices employed by Plaid to better understand how safe your personal and financial information really is.
We’ll look at each of these topics below and answer common questions we receive about Plaid from our members. On the other hand, it’s always important to consider using multiple banking services as part of your banking stack.
In practice, we feel a combination of both brick-and-mortar financial institutions that you can open online along with tech-enabled solutions is usually a good approach to both security and efficiency.
This article is part of our free series on opening digital bank accounts, including our guide on opening an online USD bank account, which you can access here.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Is Plaid Safe?
- How Does Plaid Work?
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
Is Plaid Safe?
Yes, Plaid is safe to use, which is evidenced by the number of major financial institutions that directly integrate with Plaid to facilitate connectivity with other financial service providers.
Additionally, as a fintech company enabling data transfer between financial service providers and other intermediaries, security and data privacy are of the utmost importance to the company.
Plaid encryption employs the best available protocols, including Advanced Encryption Standard (AES 256) and Transport Layer Security (TSL). Additionally, Plaid authentication uses multi-factor authentication (MFA), including initial authentication via your financial institution and secondary authentication via Plaid.
Lastly, Plaid API security involves 24/7 monitoring, independent security testing, regular third-party auditing, and public rewards to encourage the identification and resolution of potential problems.
In short, if you are concerned about the safety of Plaid, whether Plaid is trustworthy, or the reliability of Plaid’s cybersecurity, the best available answer is: Plaid follows industry best practices, is regularly audited and tested by independent parties, and is trusted by some of the largest financial institutions in the world.
How Does Plaid Work?
Plaid is an intermediary that links personal accounts between financial institutions, financial service providers, and financial technology companies while securing account login details and reducing the impact of potential data privacy leaks.
Plaid does this by enabling users to connect financial applications like Venmo to various services, authenticating account information, and protecting user data instead of sharing it directly with the application. This allows for ease of use and transfers, which is critical to the effectiveness of platforms like Venmo. That said, each of the platforms has maintenance and online transaction fees that you should take into consideration before opening and using accounts, Venmo included.
To verify account ownership, users link their financial accounts and authenticate the account with their login details. Next, the relevant information is retrieved from the service by Plaid and shared with the financial application or institution that you are using.
Note: when using financial applications like Venmo, it’s important to be aware of the Venmo fees you can incur when using the app.
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Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into whether or not Plaid is safe. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
How Do I Know if Plaid Is Safe for Me to Use?
In order to know whether Plaid is safe for you to use or not, you should consider the following variables: encryption, authentication, and desired integration. Additionally, it’s important to note that the safety and security of financial accounts is largely influenced by the security of the network and device being used by each user accessing their account details. In other words, it is not just the application or service provider (e.g. Plaid) that can result in data security risks.
Why Does Plaid Ask for My Bank Password?
Plaid asks for your bank password because it is a data intermediary that connects different financial institutions and services without directly sharing account authentication information. In other words, if you are using a financial service provider that integrates with Plaid, your bank account details (username and password) will be captured by Plaid in order to authenticate your account. However, this information will not be shared with the third-party service directly.
How Does Plaid Verify Bank Account Details?
Plaid verifies bank account details through an authentication process that confirms the account user name and account password. Additionally, Plaid uses multi-factor authentication, which authenticates user actions on two sides of each transaction. This includes direct authentication on the part of the financial institution as well as authentication by Plaid.
Is It Safe to Give My Bank Login to Plaid?
Generally speaking, it is safe to give your bank login to Plaid. However, you should always follow best practices for personal data security. This includes only accessing your financial accounts on a trusted device, trusted network, and protecting your personal information from other individuals.
Is Plaid Used to Send Money From a Financial Bank Account to an App?
No, you cannot send money from a bank account to an App with Plaid. But, Plaid does help facilitate transactions from a bank account to applications. It does this by confirming account information.
Do You Want Help Opening a US Bank Account?
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Use the link in our menu above to learn more about GlobalBanks USA. Or, contact us directly with any questions!
