Back to top

Image: Bigstock

Mastercard's (MA) Tools to Ease Consumers' Fat Monthly Payments

Read MoreHide Full Article

Mastercard Incorporated (MA - Free Report) recently introduced two Smart Payment Decisioning Tools to bring about a secured, speedy and seamless payment experience for huge monthly expenses that consumers require to make.

As part of the open banking services suite of Finicity (a Mastercard company), the new solutions named Payment Success Indicator and Payment Routing Optimizer General are likely to be availed across the United States in late 2022.

Shares of Mastercard gained 2.1% on Mar 24.

The concept of open banking revolves around creating a secured data-sharing ecosystem where the financial service providers are allowed to access the financial data following permission from banks’ customers. With the two newly-launched solutions, backed by open banking capabilities, the first one (Payment Success Indicator) allows the payment originator, ranging from merchants, banks, digital wallets to payment service providers, to utilize enhanced data analytics and machine learning technology.

For each transaction, the payment originator gets access to consumers’ bank balance and their historical behavioral risk patterns. A cluster of more than 2 million rental homes stretched across the United States (Bilt Rewards Alliance) will join the list of first fintech partners launching this Payment Success Indicator.

The Payment Routing Optimizer is equipped to suggest the day that is most suitable for carrying out a particular transaction as well as the payment rail (Same Day Automated Clearing House (ACH) or Next Day ACH) for completing the transaction seamlessly. For arriving at this decision, the solution will consider factors, such as cost, speed and risk associated with a transaction.

Considering the advanced technologies that these two solutions provide, a payment originator utilizing Payment Success Indicator and Payment Routing Optimizer is expected to boost consumers’ confidence in sharing their confidential bank account data with it.

The solutions can be of great use to consumers and merchants, particularly for those transactions that involve a substantial amount. When big monthly payments do not get processed and are returned, it causes immense worries (often in the form of increased costs) to both consumers and merchants. This challenge can be rightly addressed by the newly-launched solutions, which not only lead to an enhanced digital payment experience but also reduce the risks associated with incomplete ACH payments.  

Initiatives similar to the latest one reflect Mastercard’s sincere efforts to introduce innovative payment solutions, enabling more people to come under the ambit of a rapidly growing digital economy. Increased utilization of MA’s solutions is expected to fetch substantial revenues for the technology company in the global payments industry.

Also, the latest solutions indicate Mastercard’s another notable aim to strengthen its foothold in the open banking space. The endeavour seems a time opportune one, considering the widespread adoption of open banking across the United States.

Per the “Rise of Open Banking” study conducted by MA, 74% of American consumers either already have their bank accounts connected for automating their financial tasks or they will likely consider doing the same. Nine of 10 GenZ and millennial consumers connected their bank accounts to apps.  

As part of its further initiatives to delve deeper into the open banking space, Mastercard has Open Banking Connect in place and also acquired Aiia last year, which is a leading European open banking technology provider.

Shares of Mastercard have lost 2% in the past six months compared with the industry’s decline of 21.6%. MA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research
Image Source: Zacks Investment Research

Similar to Mastercard, other companies that made concerted efforts in the past to make a mark in the open banking space include Visa Inc. (V - Free Report) , American Express Company (AXP - Free Report) and PayPal Holdings, Inc. (PYPL - Free Report) .

Visa possesses the much-required infrastructure as well as cybersecurity and fraud prevention capabilities to develop a secured platform and ramp up the adoption of open banking, globally. In March 2022, V acquired Europe’s open banking platform Tink to deliver enhanced digital financial services to worldwide clients and boost its footprint in the open banking space.

While American Express partnered with Tink to integrate the latter’s open banking services into its application and risk analysis process, PayPal continued making significant investments in Tink to develop open banking technology.

American Express stock has gained 7.6% in the past six months. Meanwhile, shares of Visa and  PayPal have lost 5.1% and 58.4%, respectively, in the same time frame.