Finicity is part of the Mastercard family. Our open banking platform provides the financial data you need.

By Jess Turner, Executive Vice President of Global Open Banking and API at Mastercard 

So much has changed over the last 20 years in payments that it’s hard to imagine the way the world used to be. A world where booking a trip or shopping for everyday needs required visiting a local travel agent or a grocery store in person, using paper currency for every transaction.  

Today, we’ve become used to an ever-expanding menu of payment choices. Different circumstances call for different types of payments — the convenience of cards for everyday purchases and extended payment terms; bill pay and account-to-account for recurring payments; installments plans for larger purchases spread over a few months. All of these options have emerged as money has become an increasingly digital or data-driven experience, and they are only expected to become more popular in the coming years. According to the results of Mastercard’s 2022 New Payment Index Report, 85% of consumers made at least one digital payment in the past year and 93% expect to in the next 12 months. Consumers are also increasingly adopting alternatives such as digital wallets (35%), digital credit or debit cards (32%) and digital money transfer apps (31%).  

We all saw the impacts of COVID when we needed to be socially distanced. Electronic payments played a key role in keeping life and the economy running. Now, those digital experiences are supercharging other activities. Open banking lets people and businesses safely share their financial data with forward-thinking organizations in order to access new and improved financial experiences like digital payments. 

Going forward, consumers will likely have access to even more sophisticated payment solutions. Mastercard’s 2022 Index Report also showed that: 

The financial data that’s now delivered from open banking was historically available to the consumers themselves – on a computer screen or a paper statement – but traditionally has been cumbersome and complex to use. Yet, with open banking, consumers can now take advantage of new services that make their daily lives easier and with higher levels of safety by opting to share their data with a host of financial institutions and third parties, ranging from billers, merchants, fintechs and digital platforms. 

Open banking can help build an economy that works for everyone. Data is at the heart of every financial experience, from lending to money management to payments and beyond. It can also help the under-banked or those with thin or no credit files by providing easier access to financial data.  

The world is still in the early days of open banking. As an industry, we’re connecting to additional financial data types (sometimes referred to as Open Finance) such as investments, retirement, payroll, and utilities. Financial institutions and fintechs are continuing to innovate financial experiences. In the ecosystem of payments, we’re dramatically expanding choices for consumers and businesses to pay or get paid how, where and when they want.   

As an industry, we’re increasing payment choice, but we’re also optimizing these experiences. Our Smart Payment Decisioning Tools integrate consumer-permissioned data in the account-to-account payment experience, providing billers with indicators of payment success likelihood. Then enhancing payment processing options based on factors like speed and confidence. We are working with our partners to modernizing account-based payments to provide the best outcome for consumers, banks and merchants. It can ensure a higher level of completed payments, supporting stronger impact for consumers and operational efficiencies for banks. Some of these data services are delivered through Finicity, a Mastercard company. 

As open banking-enabled financial services proliferate and their use impacts our daily lives, we as consumers and businesses will expect the same security, protections, and confidence we’ve come to expect of our other financial experiences. We will also see that our ability to control and safely share our data using bank accounts, Pay-by-Bank, blockchain, cards and digital wallets will be transformational to our money experience – making it easier to understand our financial fitness and gain the insights needed to make the best financial decisions. 

To deliver on its promise, open banking requires the most advanced principles and technology in data privacy and security — to provide an easy and effective way to verify account ownership and identity. The open banking ecosystem is rapidly expanding, ushering in the next wave of systems that scale. Players with deep expertise are injecting further trust for even greater adoption. Early results indicate that we’ve got a bright future ahead – more choice in lending and payment types, more control over our financial data and more insights to help us achieve our financial goals.  Learn more about our Mastercard Open Banking solutions for payments and account opening.

Highnote has become the latest Mastercard Engage partner.  As a qualified technology partner within the Mastercard Engage network, Highnote can help businesses quickly build and deploy embedded finance solutions at scale. Through this partnership, cardholders can initiate transfers directly in and out of card products powered by Highnote. 

This partnership additionally enables customers to not only take advantage of Highnote’s industry-leading ACH origination, card issuance, and money movement capabilities but also instantly verify cardholders’ accounts, with their permission.

“The pandemic accelerated the adoption of digital payments through embedded finance,” says Mastercard’s EVP, U.S. Open Banking, Andy Sheehan. We see this partnership as an excellent opportunity to give consumers and businesses more choice in how they pay for goods and services. We’re thrilled to bring together Highnote and Mastercard teams to allow enterprises to seamlessly embed payments into their existing digital products.” 

Take a deeper dive into the innovation of this partnership here.

Mastercard has partnered with upSWOT, a U.S.-based white-label embedded financial platform, to add data for small businesses on upSWOT’s platform.

With the addition of owner-permissioned data from Mastercard’s open banking platform, upSWOT now gives small and medium-sized businesses (SMBs) the ability to link financial data to 200 API-enabled apps. These include accounting, enterprise resource planning (ERP), payroll, ecommerce, Customer Relationship Management (CRM), marketing, and POS business applications.

With this partnership, Mastercard and upSWOT will be able to provide SMBs with a smooth and effective approach to run their operations.

Read more about this innovative partnership here.

OPEN, EMBEDDED, MODULAR, AND ON A PLATFORM

The rapidly-evolving space of open banking, embedded finance, modular banking and banking as a platform is driving innovators with an API mindset, and the future will see more and more public-facing consumer brands embrace APIs across many industries.

A new report from Mastercard Data & Services looks at the relationship between BaaS and open banking, an aggregated approach to BaaS as it evolves into hosted marketplaces and ecosystems and how banks and fintechs can enable BaaS at scale.

Read the full report here.

Launched by J.P. Morgan Payments and Mastercard, Pay-by-Bank is an ACH payment that uses open banking, which enables consumers to permission their financial data to be shared seamlessly between trusted parties to let them pay bills directly from their bank account with greater security. No longer will they be faced with the tedium of typing in routing and account numbers each time they need to pay a bill. For billers and merchants, it automates consumer onboarding and reduces the risk and cost of storing bank account information.  

Pay-by-Bank holds huge potential for billers to take the pain out of recurring payments such as rent, utilities, payments to government, tuition, insurance, and health care where ACH is the primary medium of payment.  

Read more about this secure, streamlined open banking innovation here.

Once driven by early adopters like fintechs and tech enthusiasts, open banking is increasingly becoming embedded into the global financial landscape online and through apps from players across the ecosystem. And it is only expected to grow. From 2021 to 2026, the number of open banking users is expected to increase nearly eightfold. And instant payment flows enabled by open banking are expected to increase by 30 times.

Open banking allows for all boats to rise — including merchants, fintech innovators, large and small financial service providers and, most importantly, consumers and small businesses.

Jess Turner, Executive Vice President, Open Banking and API at Mastercard talks about the choice, innovation and inclusion in open banking that is lifting up opportunities across the entire ecosystem. Read here for more.

Consumers are embracing digital payments and turning to fintech for everyday finance needs. According to Mastercard’s 2022 Global New Payments Index, emerging payment methods like account-to-account payments, digital wallets and Buy Now, Pay Later are all on the rise. Eighty-five percent of consumers have used a digital payment method within the last year. And 93% are likely to use a digital payment method in the coming year.

Many of these emerging digital payments are powered by open banking and are a natural progression of the shifting landscape of payments. Through our latest research, we wanted to share five key trends to consider when integrating digital payments into your fintech innovation.

1. Consumers want convenience when paying bills

Consumers across the globe are relying on digital channels for paying bills because it is more convenient and makes it easier to manage finances.

Subscriptions, bills, utilities, loan repayment and retail payments are more convenient with open banking-powered apps and services. Eighty-one percent of consumers have already heard of account-to-account payments, but they may not know that open banking added speed and convenience to A2A, or that A2A payments can now be made at the point of sale, without typing in card details or writing checks.

2. Consumers seek flexibility in making payments

The majority of global consumers want the flexibility and control to optimize digital payments. Similar to the motivations around bill pay, consumers are connecting their accounts to automate repayment for BNPL and installment loans. Fifty-eight percent of consumers are open to connecting their bank account to other financial services to enable automatic repayments, and 52% percent say that they use digital repayment tools because they help to prevent missed or late payments.

3. Security is top of mind

Consumers recognize the convenience that digital payments offer, and security remains a top concern, highlighting an opportunity for providers to build trust. Building comfort with emerging digital payments is key to supporting future adoption as the two trend together. Faster transactions, convenience and transparency are the top reasons that help consumers overcome security concerns.

4. Consumers rely on fintech to manage finances

Consumers are relying on fintech, and indirectly open banking, to accomplish everyday financial tasks. Eighty-three percent of consumers have used digital tools for at least one financial task, and over half use technology to accomplish five or more tasks. The majority see making a payment as the most beneficial use case.

5. Emerging payments are strongest among Gen Z and Millennials

Younger generations have gone more digital in their purchasing and payments behavior globally and it’s anticipated that their use will continue to increase. These generations are less likely to make in-person purchases and payments: 50% for Gen Z compared to 78% of Boomers. They are also less likely to use cash for purchases. While security remains a concern for them, it is less heightened than for older audiences.

Building the Future of Payment Choice at Mastercard

At Mastercard, we have always powered experiences that enable customer choice. Our solutions are built to meet consumers’ financial needs and designed with security at the center.

In recent years, we have further differentiated Mastercard in the market by diversifying beyond the card. We’ve built a complementary open banking platform that enables ACH and account-based payments with best-in-class capabilities across infrastructure, applications and services. Empowering people to pay and get paid using a card, bank account, cryptocurrency, or even cash. Using any device or no device. In real-time or later, truly empowering people with flexibility and control.

Click here to download the full Global New Payments Index for a deep dive into emerging payment areas including digital payments, account-to-account, cryptocurrency, open banking and BNPL, among others. 

Certain open banking solutions are provided by Finicity Corporation, a Mastercard company.

Offering fast, secure payment choices to consumers is absolutely essential to the success of any small-to-mid-sized business (SMB). The digitization of every business, large or small, has been underway for decades, but recent studies show that the pandemic accelerated that process by five years. 

Consumers are looking for fast, convenient, contactless ways to shop and pay bills, driving businesses to adopt open banking-powered card and non-card technologies and platforms to service them. 

Payments are the Entry Point to Open Banking for Small Businesses

Nearly nine in 10 business owners utilize digital payments and open banking-backed payments, speeding up cash flow. Owners are also leaning into open banking to verify, secure and personalize payment transactions. 

SMBs are projected to spend more than $100 billion on payment services by 2025. It’s no surprise that payments are the open banking entry point for small businesses, according to Mastercard’s Rise of Open Banking small business report. 

As emerging payment methods like cryptocurrency and digital wallets gain widespread adoption, SMBs rely on open banking to create streamlined customer journeys. 

Ninety percent of SMBs utilize services that link accounts, enabling the speed, convenience and confidence of open banking payments. Owners cite a few core payment-related benefits for linking accounts:

Small Businesses are Quickly Migrating to Digital

The pandemic-driven fast-forwarding of digital adoption by SMBs has raised owners’ financial IQ, as 95% consider themselves heavy fintech users. The top driver for fintech use is the desire to make their businesses more digital. Permissioned data and the payment innovations it enables are primary needs for the SMB, as 92% are currently using or want to use digital payment systems. With a 50.5% increase in online sales from 2019 to 2020, the trend toward digital is evident, and businesses are embracing open banking to stay ahead of the curve.

SMBs are looking for solutions for agility and resilience, powered by technology. They’re facing challenges that are mostly digital, and they’re looking for digital solutions. Owner-permissioned data, insights and analytics from open banking platforms is creating new payment experiences for SMBs to offer consumers. To the SMB owner, open banking is an opportunity to partner with an innovator and grow. 

Accelerating adoption of digital channels means that a small business needs a partner that can handle real-time bank account verification, account data snapshots and predictive analytics. These core services can mitigate payment failures and fees, enable onboarding, maintain compliance and power next-gen payment apps and services.

Mastercard’s complementary account-based payments business leverages best-in-class capabilities across infrastructure, applications and services. By converging capabilities, Mastercard provides one trusted platform that empowers businesses to pay and get paid with confidence, using a card, bank account, or cryptocurrency. SMB owners can use a device or no device, and send or receive payments in real time or later. This kind of empowerment is what today’s innovators can offer the SMB, by leveraging open banking solutions. Maximum choice in payment types and methods, powered by open banking, providing effective tools for small business. 

Open Banking Payment Innovations are Gaining Momentum

Account-based payments are an emerging area ripe for targeted fintech development. Open banking technology allows you to integrate consumer-permissioned technology to your fintech innovation that offers more ways to pay with greater speed, convenience and confidence. With better quality data and insights about the small business, the non-card payments journey can be smoother.

Account-based payments are a new way for consumers to pay small businesses with convenience, security and control. Instead of entering payment card information, the customer can view their bank and the account they want to use, authenticate themselves, and pay immediately. Customers can: 

Mastercard is delivering the platform for innovation in the payments sector, giving fintechs the ability to scale up confidently. The recent release of Mastercard’s Smart Payment Decisioning Tools uses real-time bank data permissioned by a consumer to show payment indicators that can raise successful payment completion rates and reduce transaction costs. With Payment Success Indicator, payment failure risk can be mitigated by scoring the likelihood of a success before initiating it. Then with Payment Routing Optimizer, payment originators are given a recommendation for the most optimal day and rail to choose for the highest likelihood of successful settlement at the best cost and speed. These next-gen tools can give the SMB the advantage they need to best compete in a growing digital economy. 

In the next installment of the Rise of Open Banking series, we look at how open banking is driving innovation in SMB Financial Management. Click here to download the full study.

Mastercard’s open banking platform takes the uncertainty out of digital payments with Smart Payment Decisioning Tools, using data analytics and machine learning make payments faster, more convenient, and safe. We risk in ACH payments and optimize cost and speed through open banking. Watch the video here: https://www.youtube.com/watch?v=k4zZg7of9nU

To learn more about our payment solutions, visit https://www.finicity.com/pay To request a demo, visit https://www.finicity.com/ach-demo.

As part of its Smarter Faster Payments Conference here, Nacha announced its 2022 Pay-Me Award Honorees, recognizing companies and organizations that have helped advance the ever-evolving payments industry.

The Excellence in Smart Payments Decisioning award will go to Finicity, a Mastercard company, for its Smart Payment Decisioning Tools.

See all the honorees here.