For many businesses and freelance professionals, staying on top of finances often comes down to the seamless flow of data between their bank and accounting software. In the case of Xero, a global favorite in cloud-based accounting, this connectivity heavily depends on third-party aggregators like Plaid. But what happens when that data bridge collapses? That’s exactly what occurred when a critical Plaid integration failed, cutting off access to vital bank feeds for thousands of Xero users — and sending accounting departments into chaos across the globe.
TLDR
In early 2024, a glitch in the integration between Xero and Plaid caused numerous bank feeds to go missing, leaving users unable to sync or reconcile transactions. The outage was traced back to API authorization errors that cascaded through both Xero’s and Plaid’s systems. Eventually, the issue was resolved through a structured API reconnection sequence, requiring user intervention and backend support. This incident highlighted both the fragility and necessity of automated financial connections in modern accounting workflows.
Understanding the Failure: What Went Wrong with Xero and Plaid
Plaid acts as a financial data aggregator, enabling software like Xero to pull transaction history and balance information directly from a user’s bank. Starting in mid-February 2024, users began reporting missing or outdated transactions in their Xero bank feeds — initially brushed off as isolated syncing delays. Over time, it became clear that a widespread issue was emerging.
The failure was eventually traced back to a change in how Plaid handled OAuth token refreshes for certain U.S. and Canadian banks. Xero’s API connector, which depended on persistent access tokens, failed to update these tokens correctly due to a mismatch with Plaid’s newly enforced expiry policies. As a result, tens of thousands of accounts were suddenly cut off from their bank feeds without notification.
The impact was immediate and severe:
- Users couldn’t import or reconcile recent transactions
- Bank balances shown in Xero were outdated or blank
- Financial reports and dashboards displayed incomplete data
- Businesses faced delays in invoicing, payroll, and tax submissions
Most alarmingly, due to API rate limits and security mechanisms, the systems did not self-correct — manual intervention became the only viable solution.
The Delicate Art of API Synchronization
API integrations may appear seamless to end-users, but beneath the surface lies a delicate orchestration of authentication layers, data schemas, and timing sequences. In this particular case, the misalignment stemmed from a structural API change within Plaid’s data access model that Xero had not yet fully adopted in its production environment.
Authentication failures occurred silently — OAuth tokens expired but weren’t refreshed automatically. Because the Xero interface still displayed old authorization data without error messages, users didn’t realize their bank feeds were disconnected until they noticed discrepancies in balances or missing transactions.
The debugging process revealed several key vulnerabilities:
- A lack of proactive alerts around bank feed failures in Xero
- Delayed communication between Xero and Plaid’s development teams
- Inconsistent error logging and user-facing messages
- Overly complex reauthorization flows, particularly for users managing multiple bank accounts
With growing discontent in the Xero user community, the demand for a fast and reliable restoration process was impossible to ignore.
The Reconnection Solution: How Sync Was Restored
To address the issue, Xero’s engineering team collaborated closely with Plaid over a three-week period to build a guided reconnection workflow. The process wasn’t just about fixing a broken link — it had to ensure data fidelity, user security, and continuity across reporting systems.
The final API reconnection sequence included the following steps:
1. User Notification and Guidance
Xero rolled out in-app alerts and email notifications to affected users, guiding them to a new “Reauthorize Your Bank Feed” interface. This led users to a step-by-step wizard designed to reconnect Plaid to their specific bank accounts.
2. OAuth-Based Authorization
Users were taken through a secure OAuth workflow where they re-entered their bank credentials via Plaid’s interface. A valid access token was then issued, compliant with Plaid’s latest token refresh standards.
3. Token Sync and Validation
New tokens were synchronized with Xero’s backend systems and tested in real-time. Added diagnostics were run to verify if transactions were syncing correctly once reauthorization was complete.
4. Historical Data Recovery
In some cases, up to 30 days of missing transaction data had to be re-imported. Xero initiated a backfill process that let users select custom date ranges, ensuring that no transaction gaps remained in the ledgers.
5. Ongoing Monitoring and Error Handling
To prevent future issues, Xero introduced new diagnostic tools that monitor bank feed health and notify users proactively when tokens expire or sync delays occur.
Once implemented, this workflow drastically reduced support tickets and restored confidence in Xero’s platform stability.
Lessons Learned: The Fragility of Automated Finance
This incident exposed the underlying fragility of modern, automated finance systems. Most users assume their bank data appears in Xero like clockwork — and for the most part, it does. But when an underlying aggregator like Plaid changes how it handles access and refresh cycles, everything from charts of accounts to cash flow projections can grind to a halt.
Both companies came away with hard-earned lessons:
- Xero: Must maintain parity with third-party API changes and improve in-app alert mechanisms to notify users about connectivity issues before data goes missing.
- Plaid: Needs to provide more developer-oriented change-logs, sandbox testing environments, and early access alerts for API modifications that could impact partners like Xero.
From a user perspective, the main takeaway is vigilance. Automated tools streamline work, but businesses must still perform regular audits, check account syncs, and have contingency workflows when automation fails.
Future-Proofing Bank Feed Integrations
In the aftermath of the incident, Xero has laid out a roadmap of improvements to its bank integration module, including:
- Advanced in-app feed diagnostics for users
- Granular permission checks for API tokens
- A public dashboard displaying real-time bank feed statuses
- Simplified OAuth pathways for multi-account reconnections
Additionally, Xero has announced a new strategic initiative to diversify aggregator dependencies beyond Plaid, including direct bank connections via Open Banking APIs across Europe and Australia. This would create a more resilient architecture with fallback pathways if one integration fails.
The aim is clear: never let a single point of failure compromise the financial fidelity of global businesses.
Conclusion
The temporary loss of bank feeds in Xero due to a Plaid integration failure was more than a technical blip — it was a wake-up call. In digital finance, seamlessness often relies on a string of invisible integrations. When one link falters, it reveals how much modern accountants, entrepreneurs, and CFOs depend on real-time data.
Thankfully, swift collaboration and technical transparency enabled a successful resolution. With continued investment in redundancy, diagnostics, and user empowerment, Xero is working to ensure this type of failure becomes far less likely in the future — and if it does occur, users won’t be left in the dark again.