Mastercard to Acquire FinTech Firm Finicity
To most people, companies such as Visa and Mastercard are viewed as institutions akin to banks. In reality, each of these firms consider themselves to be technology companies — or FinTechs, even. It should come as no surprise then that each card company has been looking to expand their offerings, both by partnering with and even acquiring FinTech startups. The latest example of this comes courtesy of Mastercard, which has just announced a major purchase.
This week Mastercard announced that it would be buying the FinTech Finicity. Currently, the purchase is valued at $825 million. However, Mastercard notes that Finicity’s existing shareholders will have a performance target based earn-out opportunity worth an additional $160 million.
Finicity offers a number of solutions from credit checking to financial data and account verification. For example, their API allows apps and tools to access transaction data, bank statements, and more with the permission of the consumer. In fact, the company’s technology can be seen at work in Experian’s Boost feature. Other current clients include the likes of Freddie Mac, Fannie Mae, and more.
Mastercard’s purchase of Finicity bears some obvious parallels to another major FinTech deal from earlier this year. In January, Visa announced that it would be acquiring the popular banking API tool Plaid. Of course, while Finicity’s cost won’t break $1 billion even if all targets are reached, Plaid’s purchase price is set at $5.3 billion.
Announcing the acquisition, Mastercard president Michael Miebach said, “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.” Miebach added, “Finicity has a proven business, built on partnerships with thousands of banks and FinTech, 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.” Meanwhile Finicity co-founder and CEO Steve Smith said of the deal, “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.”
As mentioned, it would seem as though Mastercard’s acquisition of Finicity is in response to Visa snapping up Plaid. While the former might not be as ubiquitous as the latter, Finicity has proven itself with the high-profile clients in its stable. Now under Mastercard’s wing, perhaps the company will grow to rival other such APIs and give Visa’s Plaid a run for its money.