Consumers are bombarded with offers for new digital accounts and payment cards, but to move money to those products, they must prove that they have those funds in another account — a process that could take up to three days under the common practice of using microdeposits.
To verify that a consumer owns a bank account when linking it to a new service, many providers use ACH transfers to place small sums of money and then ask the consumer to confirm those amounts. It's the ACH system that slows this process down, according to Vidya Peters, chief operating officer at Marqeta, a digital card issuance provider based in Oakland, California.
"People don't think of money as a static thing," Peters said. "They want to move through different accounts quickly and do so immediately after linking to a new account."
Marqeta is working with the financial data company Plaid, based in San Francisco, to allow cardholders to authenticate bank accounts without the use of microdeposits. The partnership also supports notifications and real-time status updates for transfers between different accounts. "Microdeposits take a lot of time in an era of 'instant everything,' " Peters said.
The collaboration comes as Marqeta, which recently went public, has been striking deals to establish new lines of business for its card-issuing platform. At the same time, Plaid, which specializes in data aggregation, is also forging partnerships to expand its role as conduit for open banking.
"Consumers want to have access to their funds right away," said Eric Sager, chief operating officer at Plaid. "The way to do that is to simplify ways to share financial information and move money across applications."
Although the process of using microdeposits is straightforward and inexpensive, Marqeta and Plaid contend that imposing a three-day waiting period is too long, and consumers may lose interest in whatever new service they're trying to sign up for while they wait for those deposits to arrive.
Other innovations in the payments industry favor a more open and faster exchange of data, according to David Shipper, a strategic advisor in Aite-Novarica's retail banking and payments practice in Scottsdale, Arizona.
"The more time you have to wait for an account, the more of a chance there is that the consumer will change their mind," Shipper said, adding that digital card issuance is reliant on the ability to use that card quickly. "Speed is important. If I have to wait three days to use my account, then why should I get an 'instant card'?"
Since its IPO, Marqeta has partnered with
The Plaid partnership adds near-real-time verification to its mix of services. By using open APIs to verify a bank account, the account authentication process can be sped up and the consumer is in more control of authorization, said Andrew Steadman, senior research director at Gartner in Bridge, U.K.
"Open banking principles are all about the customer being in control of their data and choosing when and when they wish to share it," Steadman said. "This is a good example of the fintech sector redefining the approach to a traditional problem and delivering improved customer experience."
Peters emphasized the improvement in security as well. "Customers are no longer storing information about external accounts. They just need Plaid and Marqeta to exchange bank account information," Peters said.
Since Visa's deal to acquire Plaid was
Marqeta faces competition from firms that offer
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