Finance

Plaid quietly acquired a startup founded by 2 Robinhood alums, hinting at its plans to push further into payments

  • Plaid is pushing deeper into payments with an acquihire and a slew of new partnerships.
  • Plaid acquired Flannel, a fintech building payments APIs, in March.
  • Plaid has announced several partnerships in payments this year, including with Square, Railsbank, and Paysend.
  • See more stories on Insider’s business page.

The competition for engineering talent is fierce, even for fintech darlings like Plaid, which is in the midst of an aggressive hiring push.

In March, the fintech quietly made a talent acquisition — often called an ‘acqui-hire’ — of Flannel, a payments-focused startup recently co-founded by two former Robinhood engineers, Insider has learned.

Arpan Shah and Hongxia Zhong, who have worked together for years, founded Flannel in the fall of 2020.

Shah and Zhong were both early engineering hires at Robinhood, joining in 2015 and leaving in September 2020, according to their LinkedIn profiles. Shah started at Robinhood as an engineer, eventually taking on leadership roles and becoming head of data platforms and data products. He’s now part of engineering leadership at Plaid.

Zhong was a senior engineering manager at Robinhood, developing its back-end infrastructure, including payments, and its KYC and onboarding flows. Zhong is also an engineering manager at Plaid.

Flannel was focused on building application programming interfaces (APIs) for new ways of moving money, such as real-time payments as well as OCT, a way to send money to a credit or debit card. It raised seed funding from investors including Accel, Susa, and Index Ventures (also an investor in Plaid).

Its four-person team of engineers are now working in engineering and infrastructure at Plaid, with a few focused on payments use cases.

Before Robinhood, Shah and Zhong were software engineering interns at Google and both attended Stanford, where they earned undergraduate and graduate degrees.

“We were impressed with their knowledge about data infrastructure and fintech, and they’ve been great additions to our engineering and infrastructure teams,” a Plaid spokesperson told Insider.

Flannel’s focus was on payments, a growing area for Plaid

While Plaid’s original focus was serving as the piping between fintechs and banks, offering both sides a way to access the data needed to move money, its ambitions have expanded.

This year it has announced a slew of new partnerships aimed at getting more involved in different parts of the payments process. In May, Plaid announced its partnership with Square to power bank account payments for its business customers.

Plaid is also starting to get involved deeper in the movement of money internationally, as well. Its payments initiation API enables money movement between bank accounts for Railsbank in the UK, and cross-border money transfer service Paysend.

Plaid’s potential in payments offerings was cited by the Department of Justine in its antitrust lawsuit aiming to block Visa’s planned $5.3 billion acquisition, announced in January 2020.

The DOJ said that Plaid’s ability to facilitate bank account-based payments could pose a threat to Visa’a massive debit-card business, and Visa’s acquisition was an attempt to squash Plaid as a competitor.

While Visa maintained that the lawsuit was “legally flawed,” Visa and Plaid called off the acquisition in January 2021.

In April, Plaid raised a $425 million Series D, which valued the fintech at $13.4 billion, more than double what Visa planned to pay in early 2020.

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