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Mastercard to Enhance Open Banking via Finicity Acquisition

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Mastercard Inc. (MA - Free Report) announced that it has entered into an agreement to acquire Finicity, a leading North American provider of solutions for financial management, payments and credit decisioning.

The price of the deal is pegged 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.

Finicity’s acquisition is in line with its strategy to grow and strengthen Mastercard’s Open Banking platform.  Open Banking depends on open application programming interfaces (APIs), which allow trusted third-party developers to build services for financial institutions. The APIs are used to share bank data among various financial industry players and should ultimately, spark competition and encourage new product development, such as loan and mortgage processes, rapid account-based payment initiation and personal financial management solutions among others that benefit the end user.

Finicity will help Mastercard live up to its commitment to financial institutions and fintechs across the globe. Finicity technology services, such as Quicken Loans Rocket Mortgage and Experian Boost are highly complementary to Mastercard’s open-banking platform and have the power to shape the next-generation open-banking services. Finicity also shares Mastercard’s commitment to consumer-centric data practices, ensuring that consumers have a say in how and where their information should be used.

The deal will enhance Mastercard’s existing open-banking solutions by enabling the same to expand in North America and other key geographies. Presently, Mastercard’s open-banking services in Europe facilitate connections to more than 1,800 financial institutions.

Mastercard’s current technology and expertise combined with Finicity’s new analytics platforms will help streamline the credit decisioning process for consumers and small businesses.

Finicity’s belief in keeping customer data safe and secure also gels with that of Mastercard’s commitment to maintain data security and privacy.
Today’s digital economy fueled the trend of open banking and makes this a strategically important market for Mastercard. Another company in the same space, Visa Inc. (V - Free Report) , is also making efforts to expand its Open Banking services by announcing the acquisition of Plaid, a silicon valley data aggregator, at the beginning of the year.

In the past three months, the stock has surged 50% compared with the industry’s growth of 45.9%. Other companies in the same space, such as American Express Co. (AXP - Free Report) and Discover Financial Services (DFS - Free Report) have soared 44% and 102.7%, respectively, over the same time frame.

Mastercard currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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