Finicity has been an open-banking catalyst for Mastercard. One new Mastercard product, called Payment Success Indicator, relies on bank account information provided by the consumer on an opt-in basis. The product was developed through open banking, or a process for sharing bank account information with third parties.

A merchant, bank, digital wallet or payment service provider uses this bank account information to access a consumer’s balance and historial behavioral risk pattern for each transaction. That informs the Payment Routing Optimizer, which recommends the right day and payment rail (such as same-day ACH or next-day ACH) that strikes a balance for cost, speed and risk.

Read more at American Banker.

Every day, to a larger and larger portion of consumers, the pre-digital era of account opening becomes smaller in the rearview mirror. Among the growing millennial and Generation Z consumer demographics, the idea of visiting a physical location to open a financial service account might almost sound vintage.

But just how many consumers are we talking about? To find out more about what’s driving people to establish and maintain the financial foundations of their day-to-day digital lives, Finicity teamed up with PYMNTS to publish Account Opening and Loan Servicing in the Digital Environment. 

Drawn from a survey of over 2,300 U.S. consumers in December 2021, this report illustrates the rising number of consumers opening accounts digitally, their levels of comfort in managing their finances on a screen and the distinct role that digital plays between account types.

Account Opening

The numbers show that consumers are rapidly adopting online banking services in lieu of taking trips to brick-and-mortar branches. About 151 million adults in the U.S. opened a new financial account in the past 12 months, and more than three-quarters of them did so digitally. 

Banking has gone mobile in a big way as well. More consumers than ever are opting to bank from anywhere: according to prior PYMNTS research, 69% of all consumers opt to bank from their couch, the sidewalk, restaurants—wherever they feel like it—with their financial institutions’ mobile applications. Within the past year, 76% of all new financial accounts were opened via digital means.

Additionally, almost eight-in-ten Gen-Z consumers reported feeling “very” or “extremely” comfortable opening a financial account with a mobile app. That’s an entire generational cohort for whom mobile banking is simply the norm.

A significant portion of consumers—36%—said that they believed opening an account digitally was more secure than through traditional means, and younger cohorts were most likely to say that they felt more secure providing financial data such as proof of income and employment via open-banking channels.

Loan Servicing

Loan servicing is going digital as well. Most consumers have at least one outstanding loan account open, and most of them also manage those loans digitally whether on a desktop or mobile environment.

A large generational divide exists in our data regarding loan management—older consumers form a larger portion of those with loans to manage, and older consumers also express less comfort with digital finances overall. Concerns with data security are the top reason consumers gave as to why they wouldn’t elect to manage a loan digitally. 

On the flip side, the portion of consumers who are “more” or “much more” likely to use a digital financial account to manage loans grew 54% over the past two years, and consumers indicate that they feel much more comfortable with the idea of opening a new account online.

Consumers also indicate an interest in one of the main benefits of open banking—convenience. Half of consumers say that they’d be more likely to open a new account if the required financial information—income and employment verification, for example—were automatically transferred as part of the process. Verification takes time and labor, and open finance solutions allow both consumers and lenders to skip mountains of paperwork at account opening.

Learn More

That’s just the tip of the iceberg. It’s been clear for a long time that the future of financial management is digital. PYMNTS and Finicity have brought you the data showing just how quickly things are accelerating in the space. To learn more, download Account Opening and Loan Servicing in the Digital Environment today.

Mastercard is launching a new suite of Smart Payment Decisioning Tools to reduce risk in ACH payments and optimize cost and speed through open banking.

Merchants can now use advanced data analytics and machine learning to make the payment experience safer and smarter for everyone. Mastercard is launching two new Smart Payment Decisioning Tools, Payment Success Indicator and Payment Routing Optimizer, part of Finicity’s open banking suite of services that enables payments and account creation seamlessly and securely.

Read more about this new solution here.

The payment landscape continues to shift. The move from cash and checks to digital payments such as ACH (automated clearing house) has accelerated, particularly in high-dollar or recurring categories like rent and utilities. These moves offer benefits for both consumers and merchants – more choice, simpler experiences and greater speed to payment – but they come with a few challenges. 

Unsuccessful transactions create friction in the experience by leaving parties scrambling to find a different way to get a payment through, or it can generate penalty fees for both merchants and consumers. There is always the risk of fraudulent accounts or account credentials being used.

To improve the process, Mastercard today unveiled a new suite of Smart Payment Decisioning Tools that minimize these pain points. 

The new products – Payment Success Indicator and Payment Routing Optimizer – rely on real-time bank data permissioned by a consumer to show payment indicators that raise successful payment completion rates and reduce transaction costs.

When it comes to ACH transactions, Nacha reported that payment volume on the modern ACH Network increased 7.7% in the third quarter of 2021 alone, showing that consumers are becoming increasingly interested in making direct payments from their bank accounts.

With the increasing volume of ACH payments, there are a few hurdles that may potentially slow the increase in adoption, delaying the improved merchant and consumer experience: 

• Settlement risk – Lack of payments visibility leaves merchants exposed to the potential for returns, which disrupt and add friction to a consumer-merchant relationship. When a customer ‘walks away’ from a payment experience, the merchant is unsure of the likelihood of ACH settlement. This has the potential to create a costly return process with added fees and manual intervention or operational costs.
• Security – On occasion, merchants experience failed payments due to a consumer providing false or inaccurate credentials.
• Payment decisioning – Having multiple ACH payment options, such as the payment rail and settlement date, provides consumer choice and minimizes expense. However, lack of greater visibility can introduce risk to settlement. 

Minimizing Payment Failure, Maximizing Cash Flow.

How do these pain points play out in the market? According to Mastercard research, each time an ACH payment fails, the merchant is hit with a fee. Fraud also continues to be a major issue in payments. According to a 2021 AFP Payments Fraud Survey, checks and wire transfers are by far the preferred methods that fraudsters exploit, but ACH debits have seen an increase in fraudulent activity as well. 

Enter the power of open banking. By using consumer-permissioned data, these hurdles can be lowered or even eliminated. 

With Payment Success Indicator, failure risk is mitigated by scoring the likelihood of a successful payment before initiating it. Then with Payment Routing Optimizer, originators are given a recommendation for the most optimal day and payment rail to choose for the highest likelihood of successful settlement at the best cost and speed. 

Better Data, Better Decisions.

With smart data comes better decision-making. This is true in virtually every aspect of life, and it’s true in handling account-to-account payments. Leveraging machine learning and predictive modeling, Payment Success Indicator and Payment Routing Optimizer can help mitigate or eliminate ACH failure. This can increase cash flow and improve the bottom line while also creating a more positive experience for customers.

Consumers are adopting more apps and services that utilize digital checkout and payment options. It’s more important than ever to minimize fees and their associated costs, reduce fraud, non-sufficient funds (NSF) returns and make payment settlement confident and cost-effective. 

By utilizing consumer-permissioned bank insights, Payment Success Indicator will provide payment originators a composite score across 10 future calendar days, as well as an individual score for each of those 10 days. Scoring is based on real-time balance and historical behavioral risk patterns. This system is used to evaluate the likelihood a given amount will settle successfully. 

If there is a high risk of settlement or non-sufficient funds over the given time period, the merchant can then use that information and request an alternative payment method, deny the transaction or assume the risk and proceed.

The analytics engine returns a score separating the risk factors across four tiers, giving merchants the advantage of maximizing the available data before making the decision to initiate a payment:

• Tier 1: Highly likely to settle.
• Tier 2: Likely to settle.
• Tier 3: Less likely to settle.
• Tier 4: Do not process. Errors present.

Each composite score comes complete with weighted reasons accompanying it. Account balance, NSF history, consumer spending and consumer deposits are all factored into the analytics.

Payment Routing Optimizer will make payment rail, cost and payment date suggestions, based on the risk findings by Payment Success Indicator. 

For example, if the balance is available in a consumer’s account to make the payment today, but the analytics determine that it may not be available over the next few days, Payment Routing Optimizer will suggest Same-Day ACH over risking Standard ACH processing. 

This product aims to take the friction out of choosing between digital payment options with future updates of the Payment Routing Optimizer potentially including a debit card option.

Real-World Benefits.

The Bilt Rewards Alliance, a collection of more than 2 million rental homes across the country that lets renters earn highly valuable rewards points just by paying rent, will be the first fintech partner to launch Payment Success Indicator. 

“Our mission is to help renters get the most value out of one of their biggest expenses, and returned payments create significant expense and friction for both residents and landlords,” says Ankur Jain, Founder and CEO of Bilt Rewards. “Payment Success Indicator should significantly reduce the potential for returned payments, delivering a digital payment experience that works harder and smarter for everyone.”

Through smart decisioning analytics, Mastercard is helping financial services innovators and payment platforms change the ACH payments landscape. Increased confidence, minimization of fees, improved profitability and simplified payments. That’s the power of open banking. 

Click here to contact your sales representative for more information on our Smart Payment Decisioning Tools.

Consumers don’t want to go to a branch or to be limited by business hours for a call center to transact and manage their money. Digital channels are offering them the possibility to manage their accounts anytime, anywhere.

This has been confirmed by research conducted by PYMNTS and Finicity, a Mastercard company, which found that more than three-quarters of those who opened a new financial account in the last year used digital channels to do so.

Lisa Kimball, SVP for Open Banking at Finicity, talks with PYMNTS about the acceleration of digital banking adoption.

Watch the video interview here.

Banking at the speed of now requires financial institutions to process payments quickly and maintain compliance. Today, open banking lets Financial Institutions (FIs), payment platforms and fintechs deliver payment services with the speed and ease that consumers now demand. 

But many organizations still rely on outdated methods to process payments, forcing consumers to wait. They could and should be supporting lightning-fast, real-time payments, recurring payments, refunds and disbursements. Practices like micro-deposits and pre-notifications for account opening and funding or payment processing jam up the experience. Delays around bank account details and balance verification don’t help, either. 

The stakes are high. According to one industry report, twice as many consumers walk away when faced with slower methods. “The abandonment rate for FIs that do not require micro-deposits for ACH funding is 13%–in contrast to 27% for those that do.” 

Dissatisfied customers can overwhelm customer support channels when these methods fail. Even worse, scammers love to exploit these older practices to gain rogue access to accounts. 

Enter: Finicity, a Mastercard company. 

Our open banking platform meets the needs of digital consumers and the digital payment ecosystem by enabling clients to verify the essential account details, owners, and balances that are needed to transfer, get paid or set up an account with confidence.

Digital payments just make sense. One study shares that close to three-quarters of consumers have or would connect their bank accounts for digital payments. In another survey from PYMNTS of supply-side organizations, the majority (63%) said they prefer being paid electronically, specifically via ACH. Just one-quarter wanted to get paid by paper check.

Read more: Learn how to harness the power of open banking for secure, rapid, delivery of consumer payments – Download our free eBook now!

Our platform relies on open banking innovations to support a wide range of digital payment experiences for FIs and consumers. A few popular use cases include:

• Secure account opening and funding 
• Mortgage and consumer loan repayment/servicing
• P2P money transfers
• Direct ACH payments (P2M)
• Funding digital wallets
• Government disbursements
• Recurring, account-based bill payments 
• Buy-Now-Pay-Later and installment-style credit

Move Money With Confidence

We designed our platform behind a driving principle: Pay Confidently. 

This means reliably fast data and superior, API-based connections with leading financial institutions. We layered in added intelligence and deep learning which can help to mitigate fraud while reducing payment failure and pesky NSF fees. 

Each year, more of the world’s leading banks, fintechs, and payment platform providers deliver faster, more secure consumer payments with the power of open banking.

We look forward to seeing how you’ll use open banking capabilities to exceed your customers’ expectations. 

Do you have a question about how open banking can improve payment enablement? Send us an email or download our PDF overview. 

Ready to see open banking in action? Request a demo online.

In the world of real-time ACH payments, open banking instant account verification is quickly making the old, manual methods look like the rotary phone. Why use an unreliable relic, when there’s a better, more secure, faster innovation? Throughout the years, financial institutions have relied on voided checks, manual routing and account number input by the consumer and microdeposits. These require days or weeks to complete, and are prone to errors or fraud.

More recently, data consortiums were used to confirm customer-submitted account details, checking them against existing databases. This assisted with clearing Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements. Mixed-solution authenticators provided a fraud risk rating for the account being verified, but their information was sometimes based on older data. At best, these methods yielded only a sensible prediction of risk. With FinicityPay, failed payment risk is mitigated by obtaining account owner and balance insights prior to processing.

Previous methods of verification were rife with processing delays and lost revenue due to failed payments and fraud. Open banking APIs and platforms are the next evolution of payments. Faster, more secure and more transparent.

Open Banking Platforms Create a Real-Time Network of Connections to Financial Institutions

• Trusted financial data aggregation platforms facilitate secure access to consumer-permissioned data via traditional connections (enriched with bank-level security) and APIs.
• Tokenized access to account credentials is granted to third-party financial services innovators, utility providers and investment platforms, opening up consumer options.
• Open banking is making third-party ACH payments faster and more secure, maximizing savings, rewards and investment opportunities.
• A simple account balance check smooths the pre-funding path and protects consumers and merchants alike from failed payments and potential fees.

Using secure, consumer-permissioned access, financial institutions and vendors now get instant account balances and data from a consumer’s bank. Owner details, addresses, account and routing numbers and real-time balances are all immediately available. They can be scrutinized before authorizing payments on an open banking platform. Account access credentials are packaged into a “token” that can be passed to a third party. It yields no meaningful data if intercepted and hacked. This new level of security is spawning a much larger, more niche-oriented market of financial services providers and app developers. Open banking applications allow users to move money at the speed of the market. 

Open Banking Opens Up Payment Enablement and Authentication

• Innovation across all data-sharing stakeholders in the ecosystem expands what you can do to verify data and customize it to fit your payment use cases.
• New technologies like AI are now available to integrate into your user experience. Move customers through your account setup process quickly and intuitively, while gaining permission to curated data that fits your needs. 
• Once an account is authenticated, payments from it can be issued instantly (dependent upon market/account providers) throughout your suite of products. Financial management, investment, utilities and recurring payments are all open for immediate money movement.

All of this has been revolutionary for consumers. Their mobile phones are full of financial services options powered by open banking, and they’re adopting them at a rapid pace. With a few taps on the screen, a user can grant permission to third-party apps and platforms, without having to type in account or routing numbers. The app or service the user wants to access is up and running with a full package of information pre-loaded. Secure, real-time ACH payments can be made within moments of installing and setting up an app. With the richer level of insight that’s available through consumer-permissioned data, developers are giving consumers a wealth of new options for managing, spending, and borrowing money. This is industry-changing innovation. It’s giving consumers more flexibility and ownership of their financial position than ever before. 

Open Banking Simplifies the Payments Experience for Consumers

• Customers aren’t asked to supply sensitive information, just permission to their accounts.
• No more waiting periods for further verifications, like microdeposits or database checks. The customer’s data is pulled in milliseconds and rolled into the app they’re using, making real-time payments a breeze.
• Financial management apps with AI integration pull together a holistic picture of the consumer’s moment-to-moment financial well-being. 

While authenticating account details, ownership and current balance can streamline your payment process, it also reduces the hassle of setting up accounts and making payments for your customers. Enhancing their experience, especially when setting up payment is one of the first interactions they have with you.

Learn more about Finicity’s data solutions for verifying account details, account ownership, and check balances here.

Bob Schukai, EVP of Technology Development, New Digital Infrastructure and FinTech at Mastercard and other prominent execs recap 2021’s accelerated digitization in the payments space. The significant development and strengthening of Mastercard’s digital infrastructure foundation ensures that evolving consumer demands can be met. The nuances of new use cases like NFTs and cryptocurrencies are discussed, along with a forecast for 2022.

Read the article and download the eBook here.

Open banking technology is responding to the demands of an expanding market, creating new payment choices for consumers within the ACH network. Electronic payments are growing at an exponential rate, quarter by quarter. In 2020 alone, 26.8 billion payments were initiated, moving $61.9 trillion, up 10.8% from 2019. Internet-initiated consumer payments for bills, account transfers and other payments increased 15% to more than 7.7 billion. It’s clear that open banking payment apps and services are a major factor contributing to the increased ACH volume, and they are gaining mass adoption due to the added value of digital enablement.

The transition to convenient digital payments and banking services is picking up speed. Friction-hampered, outdated account validation processes are increasingly unacceptable to consumers. Remember when borrowers faxed in voided checks to set up ACH payments? While ridiculous today, clunky account validation processes persist. Loan servicers need accurate data to confirm account ownership. Finicity, a Mastercard company, and its open banking platform simplifies this and expands possibilities for both lenders and borrowers through the FinicityPay™ solution set.

Using ACH transactions, Financial Institutions can set up a new account, fund a loan, retrieve closing costs and origination fees, or set up recurring payments across mortgage, auto, small business and personal loans. 

FinicityPay serves up rich data sets in seconds, verifying account details, account owners and balances to enable accurate, confident payments. Our real-time retrieval of account financial data helps mitigate fraud risk, reduce payment failures and fees, enable onboarding and aid in maintaining compliance.  

Leveling Up With Finicity Open Banking

Finicity recently reached an integration agreement with LoanPro, a tech-forward SaaS-based solution in loan servicing software​​.

LoanPro will utilize consumer-permissioned data and smart analytics from FinicityPay solutions to verify account ownership and account credentials to fund loans, and help mitigate payment failure and fraud. LoanPro’s SaaS-based loan servicing, management, and collections platform offers a full-featured, configuration-first, API-based lending solution, designed to streamline both loan servicing and loan collections workflows. FinicityPay seamlessly adds real-time account verification capabilities to LoanPro’s digital repayment solutions.

Using Finicity’s smart data, account owner and balance check, can be verified in seconds, before initiating a payment. LoanPro can now offer improved payment success rates, reducing the risk of NSF fees. Payment fraud and failure are also minimized with FinicityPay’s secure, encrypted digital data flow. 

“Finicity’s work with LoanPro is a great example of how open banking can help providers create a seamless payments experience,” said Steve Smith, Chief Engagement Officer, Open Banking at Mastercard. “Through the integration, LoanPro’s customers will be able to validate account information in real time before pushing out funds and scheduling repayments, initiating a more strategic and accessible approach to loan servicing.”

The COVID-19 pandemic has increased the demand for digital repayment solutions, as consumers move more of their finances online. LoanPro’s Loan Management System (LMS) software integration with Finicity Pay adds speed, security, and increased payment success to the platform, an absolute necessity as the growing payments market goes digital.  

Pay Confidently

With FinicityPay, you receive fast, reliable data from the largest financial institutions, with 95% market coverage. The deep learning analytics layer in our data services mitigates fraud risk, payment failure and fees. Finicity’s solution suite is also aligned with Nacha’s WEB Debit Rule, so consumers and businesses can set up and manage their accounts with confidence.

To learn more about how open banking affects payments, download our latest eBook, Consumer-Permissioned Data Powers Payments at the Speed of Now or visit our website for more information on our FinicityPay solution set.