Open banking fintech Plaid acquires ID verification platform Cognito
Open banking platform Plaid has acquired ID verification and anti-fraud platform Cognito.
The deal, reportedly worth $250 million in cash and stock, comes five months after Plaid’s Series D extension round saw the firm gain fresh investment from JP Morgan Private Capital and AmEx Ventures.
Plaid did not disclose the value of the extension, but it added to the $425 million injection from April, which valued the company at $13.5 billion.
The Californian fintech allows consumers to connect their bank accounts to various fintechs via its proprietary APIs.
Plaid CEO Zach Perret says the current “patchwork approach” of verifying someone’s identity across financial services often results in people abandoning the signup process, “because it takes too long or it is too difficult to provide the required documents and information”.
The acquisition of Cognito and its automated identity verification platform completes the trifecta of a complete onboarding experience, Perret says, with account connection and account funding already provided by Plaid.
Plaid’s technology allows developers to aggregate spending data, look up balances and verify financial data. It also uses open banking technology to initiate payments.
Plaid says the acquisition of Cognito is “the next step in our journey” in enabling the shift to digital finance. The deal will enhance the safety of onboarding new customers, the company says, estimating that 90% of Plaid customers need Know Your Customer (KYC) solutions.
“Together with Cognito, we will deliver a full stack solution for identity verification and compliance that improves their entire customer signup experience and increases onboarding success rates, reduces fraud and saves time and money through automation,” a Plaid spokesperson tells FinTech Futures.
While these services are currently only available in the US, Plaid says it also has “plans to offer Cognito’s services in Europe in the future”.
The entire Cognito team will join Plaid, and the products will become a core part of a suite of identity verification and compliance offerings. Cognito CEO Alain Meier will run the product group and report directly to Plaid CEO Perret.
Cognito’s products are used by hundreds of digital finance companies, including Plaid customers Affirm, Brex, Current, Republic and Wyre.