Open banking platform Plaid has announced the acquisition of ID verification platform Cognito for $2250 million. The acquisition was made in both stock and cash. This deal is coming barely five months after Plaid completed a Series D funding, headed by AmEX Ventures and JP Morgan Private Capital. Following the additional capital injection, Plaid is valued at $13.5 billion.
The company enables consumers to link their bank accounts to different fintech firms through its proprietary APIs.
Plaid To Provide Improved Account Verification Process
Chief Executive Officer of Plaid, Zach Perret says the traditional ‘patchwork approach’ of verifying people’s identity usually leads to people abandoning their signup process. That’s because it is too difficult or takes a lot of time to provide the required information and documents.
However, California fintech is launching a more improved platform through the acquisition of Cognito. It will allow for account funding and account verification that will be provided by Plaid.
Chief Executive Officer of Cognito, Alain Meier, will be reporting directly to Perret and will be in charge of the product group.
According to the acquisition deal, the entire Cognito team will be integrated into Plaid, with its products becoming a major part of a suite of compliance and identity verification offerings.
The Acquisition Deal Is A Step In The Right Direction
Plaid’s technology utilizes open banking technology to initial payments. It also enables developers to aggregate spending data, verifies financial data, and lookup balances.
Plaid also stated that the acquisition is in line with the company’s strategic objectives as it prepares to expand its operations. The company is looking to shift to digital finance and the deal for Cognito is the right step in the right direction. Plaid stated that the majority of its customers require to Know Your Customer (KYC) solutions and the integration of Cognito will increase the efficiency of onboarding new customers.
A Plaid spokesperson noted that the company is committed to delivering a complete solution for compliance and identity verification. This enhances their customer signup experience and increases the onboarding success rate. Additionally, the integration of Cognito will save time and reduce fraud through complete automation.
Plaid said the service is currently available only in the U.S., but there are plans to extend it to other regions in the future.