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Mastercard buying fintech company Finicity for $825 million

Mastercard says Finicity’s technology will strengthen its open banking platform

This story has been updated with comments from Finicity

Credit card giant Mastercard announced this morning its plans to acquire Finicity, a provider of real-time financial data aggregation and insights, for $825 million.

As part of the agreement, Finicity’s existing shareholders have the potential for an earnout of up to an additional $160 million, “if performance targets are met,” according to a statement from Mastercard. It did not elaborate on what those performance targets are.

Mastercard says Finicity’s technology will strengthen its own open banking platform. Open banking, it says, gives people and businesses greater control over their financial data. Mastercard President Michael Miebach called open banking a “growing global trend” and said it was “a strategically important space” for the company.

“With the addition of Finicity, we expect to not only advance our open banking strategy, but enhance how we support and accelerate today’s digital economy across several markets,” he added in a written statement. “It’s through the use of next generation open banking APIs and clear consumer approvals information can deliver streamlined loan and mortgage processes, rapid account-based payment initiation and personal financial management solutions.”

Open banking allows for things such as determining how and where third parties – such as fintechs or other banks – can access that information to provide new services like money management programs or initiate payments on their behalf.

The news comes just five months after rival Visa announced it was acquiring fintech unicorn Plaid for a staggering $5.3 billion. Both acquisitions are examples of credit card giants recognizing the value of acquiring tech companies rather than just trying to build out the technology themselves.

Finicity is based in Salt Lake City, Utah, and has about 500 employees globally. Since its 1999 inception, it has raised a known nearly $80 million in venture funding, according to Crunchbase data. In December 2016, the company raised $42 million in a Series B financing led by Experian.

Finicity’s self-described mission is to help individuals, families and organizations make smarter financial decisions through safe and secure access to fast, high-quality data. The company launched its first financial product in 2000 and has since grown to provide financial data APIs, credit decisioning tools and financial wellness solutions. 

Finicity partners with financial institutions and “disruptive” fintech providers alike with the goal of giving consumers “a leg up in a complicated financial world.”

In an email statement, Finicity CEO and co-founder Steve Smith said the company aims to allow people to connect their financial accounts to the apps and services they want to use. For example if someone has a budgeting app, it is likely they’d want to connect their bank accounts and maybe credit card accounts so they could track and manage their income and expenses. Typically the budgeting app doesn’t have the technical ability to manage those connections across the thousands of financial institutions, so they’d work with a company like Finicity to provide that capability.

In mortgage, Finicity provides true digital verification of assets, income and employment. Its offerings are part of the Fannie Mae Day 1 Certainty program and the Freddie Mac AIM program.

I asked Finicity if an acquisition was part of its goals, and Smith said the company had previously worked with Mastercard on industry committees and “the relationship grew from these engagements to the point it seemed like an excellent fit to join forces together.”

“We did not build our company with a view of acquisition, but were focused on creating a very viable standalone organization. We believe this approach makes for the strongest organization and positioned us for such a relationship,” he added.

FT Partners served as the exclusive strategic and financial advisor to Finicity on the sale.

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