The data aggregator Plaid has begun providing real-time updates of bank and fintech account data. The challenger bank Branch is the first fintech to use the service.
Account holders trying to understand or manage their money are hampered today by the lack of real-time money movement in the U.S.
It can take three to five days for payments to clear. Most banks and some fintechs process transactions internally overnight, or in batches throughout the day. On top of that, data aggregators tend to scrape customer account data at periodic intervals that can easily be out of sync with actual account activity.
This all adds up to uncertainty: Are the account balances shown in an app accurate, or do they fail to reflect the latest checks, debits or electronic payments?
Plaid’s offering of real-time updates doesn’t solve the underlying problem of the absence of real-time payments in this country. However, it is meant to remove any additional lag caused by the extra step of data aggregation. So for the user of a fintech app using the service, the numbers displayed in the app should match the current state of the person’s account at the underlying banks, brokerages and fintechs.
“There are some cases where a bank might post a transaction and it’s been updated on the bank side, but it hasn't necessarily been communicated to connectivity services like Plaid because the update timing between the bank and the partner wasn't necessarily optimized enough to happen instantly,” said Niko Karvounis, product lead at Plaid.
Plaid’s real-time update service provides a notification layer between banks and Plaid that lets banks notify it when there's fresh data available.
“That creates that instant connectivity,” Karvounis said. “The moment it's available in the bank, it's visible in your app where you have connections to that bank account.”
This is useful to people who are waiting to see if a check cleared, if a payment settled or if funds are available.
“This is true for folks who might have some financial vulnerability in their lives,” Karvounis said. “For hourly-wage workers where there might be intermittent income and you're living paycheck to paycheck, you're going to be much more attuned to when funds are deposited, when they're available and what your transaction activity is like over time.”
This is the use case for Branch, a challenger bank that has more than 1 million users and works with 300-odd employers to provide digital banking to their employees. The workers it serves tend to be hourly employees living paycheck to paycheck.
“Our users are typically dealing with very unpredictable cash flow,” said Atif Siddiqi, founder and CEO of Branch. “Having that real-time balance and transaction data is really important to them.”
“For every user who has a Branch checking account through our partner bank, Evolve Bank and Trust, we can now send that balance and transaction data in real time so that these users have the latest data,” Siddiqi said. “If they're connecting Branch to any other fintech applications, and we know they use investment apps and budgeting apps, we'll have that real-time data.”
Employers view Branch as an alternative to cutting paper checks, which has been important during the pandemic, Siddiqi said.
Employers also have been taking advantage of Branch’s ability to push tips to workers digitally, after deliveries and such. For instance, Domino’s uses Branch to pay its drivers their tips after they complete delivery.
“What they were finding was that managers just did not have enough cash in the register at the end of the day to pay these drivers out,” Siddiqi said. “So instead these drivers were having to wait two weeks to receive their tips on their paycheck. Now they can sign up for our wallet and they have a card attached to that. They can get those tips instantly.”
Branch is also one of the many fintechs offering customers early or earned-wage access. Branch does not charge fees for any of this. It makes its money through interchange income and a flat fee for funds transfers from one debit card to another.
Banks that work with Plaid could also use its real-time updates, for instance to provide up-to-date information about customers’ accounts at other banks, so they can see all their finances in one place.
