This week, financial data aggregator Plaid announced a partnership with identity management company Okta aimed at making it easier for financial institutions to enter into data sharing agreements with Plaid.
The primary function of the partnership is to designate Okta as Plaid's vendor of choice for building the authorization system that connects a financial institution to Plaid. This integration, built on an open source standard called OAuth, allows users to connect their bank, credit union or other financial accounts with third-party financial apps without sharing their account passwords.
Plaid already uses the OAuth protocol to connect to partner firms — those with which it has data sharing agreements — and the deal with Okta does not change anything for those companies. The change is targeted toward financial institutions with which Plaid has yet to partner.
With users consent, Plaid already gets financial data off non-partner bank and credit union websites in a not-so-secure practice called
Similarly, OAuth enables a person to grant financial applications access to their bank accounts. Plaid often serves as the middleman in that case, but as long as Plaid has an API connection (rather than a screen scraping connection) to the bank, the user does not have to share their banking password with Plaid.
By holding Okta out as the sponsored vendor for building OAuth integrations, Plaid is providing an expedited path for banks and credit unions to take when establishing a relationship with the data aggregator.
The partnership may also serve to bring Okta closer to more financial institutions as it looks to become the "default identity provider for highly-regulated institutions, such as financial services and federal and state government," according to Maureen Little, vice president of technology partnerships for Okta.
"Because identity is all we do, our solutions don't favor a specific platform, and work across every device, application, cloud, and major operating system," Little said. "The result is that banks have the power to adopt identity best practices like OAuth without compromising their existing systems. And all of this translates into better security for consumers."
Plaid and Okta already have two companies taking advantage of the new partnership: Project Finance, which works with banks and credit unions to deliver personalized digital banking experiences to customers using a built-in suite of wellness tools, and Arc, which offers digital banking services for more than 1,000 software startups.
"We are thrilled to provide to our startup clients this powerhouse innovation from Plaid and Okta, companies that have built a strong reputation for secure data connectivity and customer identity expertise," said Raven Jiang, co-founder and chief technology officer at Arc. "Arc Treasury aims to provide our tech-forward customers with fast and secure data integrations for their banking needs. The new OAuth support from Plaid and Okta got us there in record time."
