Is Plaid safe? Everything you need to know

Technology allows you to make financial transactions easier and faster than ever, but any time you move funds virtually, you share personal information.

While most virtual financial services have lots of data safety features to back them, these platforms are still vulnerable to cyber crimes — like hacking, identity theft, and unauthorized transactions made with stolen data. To counter this, many people have started using Plaid, which is a service that adds layers of protection and anonymity to virtual transactions.

If you’re looking to take additional measures to keep your information safe and consider using this platform, this guide will help you learn just how safe Plaid is, how it works, and how you might use it for more secure banking. 

What is Plaid?

Plaid is a platform that works as an intermediary between financial institutions, like banks, and financial services applications, like Venmo and Robinhood. 

Instead of giving banking data like account or credit card numbers directly to applications, users enter that information into Plaid, and Plaid securely provides only the information those apps need to function or complete a transaction.  

How does Plaid work?

Plaid integrates with different financial apps, like Venmo or RobinHood, meaning you’ll see an option to take advantage of this service if the app or account you're using partners with Plaid. If you agree to use Plaid in an app, it’ll prompt you to search for your financial institution (Plaid works with over 10,000 of them), enter your banking username and password, and authenticate your identity before linking up your accounts. 

Once your bank account connects to Plaid, this intermediary will share the linked information as needed with the apps it integrates with. Here’s some of the information Plaid provides other apps when needed: 

• Personal information like your name, address, and phone number

• Transaction data like the date, type, and description 

• Account information like the routing and account number 

How safe is Plaid?

Plaid exists to make virtual financial transactions less risky by requiring you to provide fewer data points manually within apps. This limits your potential data exposure if one of the financial apps you use gets hacked or a phisher gains access to your login credentials. 

Plaid carefully protects the few pieces of sensitive data that you share with it. Plaid security features include:

• End-to-end data encryption

• Multi-factor authentication (MFA)

• Monitoring

• Security audits

Moreover, Plaid promises never to share your information without your consent or sell it to third parties. You also have no obligation to use Plaid in apps that offer it since it’s an optional intermediary service.

Why does Plaid need my bank login credentials?

Plaid asks for your baking login credentials to confirm your identity before sharing sensitive information with another financial application. That said, Plaid does not see your password or retain your login credentials — nor does the service store your banking information.

Examples of Plaid in finance apps

Plaid integrates with banking accounts and third-party financial applications for safer, more seamless transactions. Here are a few popular financial apps that Plaid integrates with: 

Venmo 

Venmo is a peer-to-peer transaction app that helps you quickly transfer funds to friends and family, whether you need to pay a friend for your half of a dinner bill or send your roommate money for utilities. Venmo leverages Plaid to verify banking data and check if there’s enough money in your account to cover a transfer. 

Robinhood 

Many people use Robinhood for electronic trading and investment transactions. If you use Plaid with the Robinhood app, it will connect your bank account to the app to allow you to transfer money for investments seamlessly.

Chime 

This online app provides financial services and other products, like a branded debit card, without being a bank or having physical locations. Plaid works as an intermediary to help people transfer funds from their bank account to Chime.

Can I stop using Plaid whenever I want? 

If you use Plaid to send banking data to another application like Venmo and wish to stop using that information or change it, you can. You just need to create a Plaid account. 

While applications won’t necessarily ask you to make a Plaid account, you’ll need one to change your preferences. Once you do, Plaid lets you delete connected accounts and choose which applications can access your banking data. Once you delete an account from Plaid, any app pulling data from it before can no longer do so, even if you continue to use that application. 

Other ways to keep your banking data safe

Plaid provides an extra layer of security when sharing your banking data online. However, not all apps integrate with Plaid, and even if they do, you may choose not to use it. Here are a few other tips for keeping your payment data safe, whether or not you use Plaid: 

• Create safe passwords: Your first line of defense for your banking account and other financial apps is your password, especially if the services you use don’t offer additional security features. Create a safe password by combining upper and lowercase letters, numbers, and symbols that don’t contain any identifying elements that a hacker could intuit, like your name. Remember to change your passwords frequently, too, especially if you expect that someone may have gained unauthorized access. 

• Use multi-factor or biometric authentication: Whenever applications or banking services offer multi-factor (MFA) or biometric authentication options, use them. Multi-factor or biometric authentication features add an extra step in your login process before you can gain access to your accounts. MFA typically requires you to enter a one-time code from a text, email, or app to log in, while biometric authentication uses your face scan or fingerprint to proceed. 

• Stay up on the latest phishing schemes: Phishing is a common scam in which cyber criminals pose as legitimate entities, like employees of a financial institution, and make seemingly reasonable requests for data. For example, a scammer posing as a customer service representative from PayPal, Venmo, or Zelle may ask you to update your login credentials, only to send you a link to a fake site to do so that’ll steal your data. 

• Watch out for financial frauds: Keep a close eye on your account statements, credit score reports, and online banking apps for suspicious activity. Financial fraud usually happens behind the scenes, with defrauders stealing your data from card skimming or hacking attacks and using it maliciously to commit financial crimes. Being on alert for this activity can help you catch it quickly and put an end to it.

Protect your accounts with IronVest

Plaid offers a much-needed security service for many financial applications, only passing essential data to the apps you use and never storing any of it. While it helps keep you safer from hacking attempts, data leaks, and other cyber crimes, there’s still more you can do to protect your data.

If you want to secure all your accounts — from digital wallets to social media profiles — behind biometric authentication and other security measures, consider IronVest. Along with securing your logins, you’ll also gain access to virtual credit cards, masked email addresses, and masked phone numbers, meaning you’ll never have to reveal your most sensitive information to third parties again.