Mastercard set to acquire Finicity for $825m
Mastercard has agreed to buy Finicity, a financial data aggregation start-up, for $825 million.
Finicity has a focus on credit decisioning solutions
If performance targets are met, Finicity’s existing shareholders will earn up to $160 million on top of the sale price, taking the total value of the deal to $985 million.
This follows a similar move by rival Visa in January, which saw the card issuer giant buy data aggregator fintech Plaid for five times the price of Finicity at $5.3 billion.
Much like Plaid’s open banking services, Finicity allows financial services firms to gain financial insights around payments, account and asset verification, and transactions.
Finicity has a focus on credit decisioning solutions, which Mastercard’s president and incoming CEO, Michael Miebach, cites in an interview with CNBC on 22 June. “They have – traditionally – a very bank-friendly model […] they’re helping banks in terms of doing better credit decisioning, they’re helping bank’s customers make sure they can apply for a mortgage or a loan in a much more easy fashion,” says Miebach.
The start-up has built up more than 16,000 bank integrations to date, and Mastercard highlights the platforms Finicity powers – such as ‘Quicken Loans Rocket Mortgage’ and ‘Experian Boost’ – to offer the “potential to shape the next generation of open banking services”.
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In 2019, Mastercard launched a suite of open banking solutions in Europe. The firm’s ‘strategic rationale’ behind its latest acquisition rests on Finicity’s “direct connection” to North America’s banking, lending and wealth management ecosystem, which Mastercard’s hopes will allow it to become a “one-stop partner” for banks, merchants, and fintechs.
The card issuer giant also wants to focus on improving credit decisioning, and envisions that the integration of Finicity’s account owner verification tools will speed up automated clearing house (ACH) and real-time payments.
“Open banking is a growing global trend and a strategically important space for us,” Miebach added in a statement. “Finicity has a proven business, built on partnerships with thousands of banks and fintechs, similar to us.”
Finicity launched its first financial product in 2000. The fintech, whose customers include Experian, Bank of America and Rocket Mortgage, has offices in Utah and Mumbai with roughly 445 employees, according to its LinkedIn page.
The fintech has raised $79.9 million to date, according to Crunchbase, with investors including customer Experian, and California’s investment-focused Bridge Bank. It made one acquisition in 2015, buying Aurora Financial Systems, a full-service prepaid debit programme manager.
Mastercard’s acquisition of Finicity is anticipated to close by year’s end, subject to regulatory approvals.
Earlier this month, it was revealed that Visa’s $5.3 billion acquisition of Plaid is being investigated by the UK’s Competition and Markets Authority (CMA). As a result, the regulator will be closing responses on 10 July, before conducting a review. This raises questions over Mastercard’s acquisition of Finicity, and whether it too will fall under regulatory scrutiny over potential impacts to competition.
