One payment trend that has gained momentum during the pandemic is open banking, the idea that funds can be validated and transferred from one account to another at another bank inexpensively and through means other than cards or checks.

This concept took a big step forward on Thursday with the announcement by Plaid Inc. of the provision of the pipelines for a service Square Inc. unveiled three weeks ago to enable businesses to receive payments on invoices through the automated clearinghouse network.

The new feature, which works with a 7-year-old service called Square Invoices, allows the San Francisco-based payments company to penetrate larger businesses than the smaller merchants that have long characterized its seller base. Square revealed earlier this month that merchants were at least doing $ 125,000 in annual volume accounted for 61% of its payment volume in the first quarter, up from 54% a year earlier.

Hewitt: Square “builds the ecosystem for [businesses] can just live inside Square.

A big selling point for Square businesses is that, with the Plaid network, they can receive ACH payments at a cost well below the card acceptance toll. “Through this partnership, Square is using a tokenized check system that uses Plaid to allow customers to securely connect their bank accounts for bank payments,” said a notice on the Plaid website released Thursday. “This verification option allows customers to quickly enter their bank login credentials to connect an account to activate payments.”

The Plaid service can verify account balances and provide a channel for the movement of funds, a capability that has helped Visa Inc.’s efforts to acquire the company. Visa withdrew its $ 5.3 billion offer for Plaid in January following a lawsuit filed by the US Department of Justice to terminate the deal on antitrust grounds.

The new service with Square “shows that Plaid is now starting to build a payment platform,” says Patricia Hewitt, director of PG Research and Advisory Services, a consulting firm based in Savannah, Georgia. At the same time, she adds, it shows how Square “builds the ecosystem for [businesses] can just live inside Square.

The type of validation service offered by Plaid and other San Francisco-based data aggregators may be particularly critical now with the growth of same-day ACH settlement and the introduction in March of a validation rule for the ACH network. . The rule, established by Nacha, the governing body of the ACH, requires transactions initiated online or through a mobile device to be verified to ensure that the original account is genuine and active.

For the entire ACH network, transactions processed on the same day they were initiated total 141.1 million in the first quarter, up 88% from 75 million in the March quarter of last year, the latest period before the start of the coronavirus pandemic in the United States. The dollar value of ACH on the same day climbed 133% to $ 187.6 billion, according to Nacha.

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