Finicity Acquisition: Key Details, Impact, and What Comes Next

Mastercard's acquisition of Finicity marks a significant step in the financial industry, enhancing its open banking capabilities. This $825 million deal, with an additional potential earn-out of $160 million, aims to provide real-time financial data access and insights, fostering greater collaboration with fintechs and financial institutions. The move underscores Mastercard's commitment to consumer-centric data protection and innovation in financial services.

What Is Finicity?

Founded in 1999, Finicity offers a comprehensive suite of financial data solutions, including lending, account management, and payment services. Its core products, such as the Open Banking Platform and Developer APIs, enable secure, consumer-permissioned data sharing. Finicity stands out with 95% coverage of U.S. financial institution accounts, leading direct data access connectivity, and stringent data quality standards. The company is also known for its regulatory compliance and partnerships with top financial brands.

Who Acquired Finicity?

Mastercard is a global technology company in the payments industry, playing a pivotal role in facilitating secure and efficient transactions worldwide. The company offers a range of products and services, including credit, debit, and prepaid cards, as well as innovative payment solutions like digital wallets and contactless payments. Mastercard's extensive network and technological advancements position it as a leader in the market, influencing the way consumers and businesses conduct financial transactions globally.

When Was Finicity Acquired?

Mastercard announced its acquisition of Finicity on June 23, 2020, during a period of increasing investment in open banking. This strategic move came as the financial industry was embracing open banking trends, which allow consumers and businesses more control over their financial data. The acquisition was completed on November 19, 2020, marking a significant milestone in Mastercard's efforts to enhance its open banking capabilities and expand its reach in North America and beyond.

Why Was Finicity Acquired?

• Market Expansion: The acquisition of Finicity enables Mastercard to expand its open banking services in North America and other key geographies. By integrating Finicity’s real-time financial data and insights, Mastercard aims to become a one-stop partner for various data, payment, and open banking needs across different markets.
• Technology Integration: Finicity’s technology and analytics platforms will be integrated with Mastercard’s existing solutions. This integration will enhance capabilities such as credit decisioning, account owner verification, and real-time payments, leveraging Finicity’s open banking platform to provide more value to consumers and businesses.
• Competitive Advantage: The acquisition strengthens Mastercard’s position as a leading open banking partner for fintechs and financial institutions. By combining Finicity’s proven technology and talent with Mastercard’s global reach and expertise, the company aims to deliver innovative solutions and maintain a competitive edge in the digital economy.

Acquisition Terms

• Acquisition Price: The purchase price is $825 million, with an additional potential earn-out of up to $160 million based on performance targets.
• Payment Method: The payment method was not explicitly disclosed.
• Key Conditions or Agreements:
  • The transaction is subject to regulatory review and other customary closing conditions.
  • The acquisition is not expected to be incrementally dilutive to Mastercard’s business for more than 24 months.
  • The transaction is anticipated to close by the end of the year.
  • Finicity shareholders have the opportunity to earn an additional $160 million if performance targets are met.

Impact on Finicity

The acquisition of Finicity by Mastercard has led to significant changes in operations and management. Finicity's technology and its 500 employees have been integrated into Mastercard's operations, enhancing the company's open banking solutions. This integration aims to leverage Finicity's real-time financial data and insights, expanding Mastercard's reach in North America and other key geographies. The focus is on aligning the two teams under Mastercard's umbrella, with a shared commitment to consumer-centric data practices.

In terms of product offerings, the acquisition has strengthened Mastercard's open banking platform, streamlining credit decisioning processes and improving payment experiences. Finicity's analytics platforms and account owner verification tools are now part of Mastercard's New Payment Platform capabilities, enhancing ACH and real-time payments. Reactions from key partners like Bank of America and Rocket Mortgage have been positive, highlighting the benefits of secure data sharing and fast access to consumer-permissioned data. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly, ensuring a smooth and efficient transition.