Why Mastercard Inc (MA) Is Buying Finicity For About $825 Million

By Amit Chowdhry ● June 24, 2020
  • Mastercard Inc (NYSE: MA) announced it entered into an agreement to acquire Finicity. These are the details.

Mastercard Inc (NYSE: MA) announced it entered into an agreement to acquire Finicity — which is a leading North American provider of real-time access to financial data and insights. The deal is valued at $825 million and Finicity’s existing shareholders have the potential for an earn-out of up to an additional $160 million if performance targets are met.

The addition of Finicity’s complementary technology and teams strengthens the existing Mastercard open banking platform to enable and safeguard a greater choice of financial services thus reinforcing the company’s long-standing partnerships with and commitment to financial institutions and fintechs across the globe.

Open banking gives people and businesses more control over their financial data. And this includes determining how and where third parties like fintechs or other banks can access that information to provide new services like money management programs or initiate payments on their behalf.

Mastercard has increasingly invested in this space over several years, including the 2019 launch of a set of comprehensive open banking solutions in Europe. And the combination of these efforts with Finicity’s technology powering platforms like Quicken Loans Rocket Mortgage and Experian Boost have the potential to shape the next generation of open banking services.

Why is Mastercard buying Finicity? Mastercard provided several reasons.

Reason 1.) 

It advances Mastercard as a strong open banking partner for fintechs and financial institutions. And Finicity’s technology and dedicated employees will enhance Mastercard’s existing open banking solutions by enabling them to expand in North America and other key geographies.

Now Mastercard open banking services in Europe feature connections to over 1,800 financial institutions. And with a direct connection to the North American banking, lending and wealth management ecosystem, Mastercard will extend Finicity’s reach to be a one-stop partner for any consumer, bank, merchant, fintech or government’s data, payment and open banking needs.

Reason 2.) 

This deal strengthens capabilities and offerings to consumers and businesses. And following the completion of the transaction, Mastercard’s existing technology and expertise combined with Finicity’s new analytics platforms will help streamline the credit decisioning process for consumers and small businesses. Plus the integration of Finicity’s account owner verification tools to Mastercard’s New Payment Platform capabilities will deliver an improved ACH and real-time payments experience to consumers, merchants, and businesses.

Reason 3.) 

This deal enhances the commitment to responsible data practices. Finicity is sharing Mastercard’s commitment to safe and secure data practices centered around the individual. Finicity’s co-founders have played a major role in the advancing the discussion of best practices across multiple industries. Plus Finicity has a strong commitment to deliver best-in-class data management practices by partnering with banks and their customers to ensure secure connectivity is established.

Due to past acquisitions, Mastercard does not expect this acquisition to be incrementally dilutive to its business for greater than 24 months. And this dilution is driven by investments in the business, including its international expansion as well as the impact of purchase accounting and integration-related costs.

The transaction — which is anticipated to close by year’s end — is subject to regulatory review and other customary closing conditions.

Key Quotes:

“Open banking is a growing global trend and a strategically important space for us. With the addition of Finicity, we expect to not only advance our open banking strategy, but enhance how we support and accelerate today’s digital economy across several markets. Finicity has a proven business, built on partnerships with thousands of banks and fintechs, similar to us. Finicity also shares our commitment to consumer-centric data practices, ensuring consumers have a say in how and where their information should be used. It’s through the use of next-generation open banking APIs and clear consumer approvals that this financial information can deliver streamlined loan and mortgage processes, rapid account-based payment initiation and personal financial management solutions.”

– Michael Miebach, president of Mastercard

“Since our founding, Nick Thomas and I have focused on developing industry-leading technology and building an organization that empowers consumers and organizations to better understand, manage and use their financial data to improve their financial lives. Enabling people to access and control their data, while ensuring best practices to protect that data, will continue to drive tremendous innovation that increases financial literacy, inclusion, and health. This partnership with Mastercard helps us accelerate this mission globally.”

– Steve Smith, chief executive officer and co-founder of Finicity

“Bank of America is a strong believer in giving people control over their financial information and the ability to share it securely. We’ve worked with both Finicity and Mastercard, as well as industry groups such as Financial Data Exchange, to accelerate the adoption of the highest standards of privacy and security for data sharing, and to eliminate the retention and storage of individuals’ financial details by third parties. We look forward to continuing our work with Finicity and Mastercard to further improve the customer experience.”

– Mark Monaco, head of Enterprise Payments at Bank of America

“Finicity has been a strong partner of Rocket Mortgage during the mortgage industry’s tech revolution. Fast, easy access to consumer-permissioned data is critical to lenders who are making well-informed mortgage real-time decisions. We are happy for the Finicity team in joining Mastercard and look forward to a continued partnership.”

– Scott Elkins, senior vice president of Investments at Rocket Mortgage.

“Brex’s innovative offering uses Finicity’s connectivity, giving us access to the best quality business-permissioned data to power our platform. The combination of Finicity’s capabilities with Mastercard’s products and services will enable us to create innovative solutions to enhance our Brex offerings.”

– Henrique Dubugras, chief executive officer, Brex

“We are pleased to see the combination of Finicity and Mastercard. We look forward to collaborating with them in our ongoing mission to help consumers.”

– Craig Boundy, chief executive officer of Experian North America