Mastercard Inc. is making a bigger bet on open banking as consumers seek to use their banking and financial credentials with more online services.
The company announced Tuesday that it plans to acquire Finicity, an open banking company, for $ 825 million, with an additional profit of $ 160 million for existing Finicity shareholders. Finicity has relationships with banks and other financial providers, and the company helps third-party platforms leverage financial credentials on a secure platform.
Finicity is part of the open banking movement, which Mastercard MA,
CFO Sachin Mehra called it “clearly a strategically important area for Mastercard.” More and more people are connecting to digital services like money management platforms or online lending applications, and those services need to securely leverage users’ bank financial credentials to use money securely, a practice that is based on open banking technology.
Mehra told MarketWatch that Mastercard has been involved in open banking in Europe and considered that the acquisition of Finicity is the best way to “move forward in the United States on an accelerated basis and take advantage of that for greater global coverage in other countries.” She said the two companies are also “in strong alignment with data management principles” when it comes to customer privacy.
Read: Mastercard shares get rare rating downgrade on Oppenheimer
It also sees room to expand into “new and different verticals,” including small business credit decisions and personal financial management. Finicity is currently strong in the mortgage industry and has “the best banking connectivity in the United States,” according to Mehra.
“In the past three months, as we have seen what happened with the pandemic and COVID, we have seen the world become more digital and there is an increased demand for capabilities that do not require face-to-face interaction,” he said. .
Analysts generally praised the combination. “We like the treatment, which feels very similar to the V for Visa,
Checkered transaction as it further strengthens Mastercard’s position with fintechs and in open banking, “wrote Barclays analyst Ramsey El-Assal, who rates overweight stocks with a target price of $ 335.
See more: Visa takes another step beyond credit cards with a $ 5.3 billion deal for Plaid
Keefe, Bruyette and Woods analyst Sanjay Sakhrani wrote that “he was not surprised by this acquisition, as open banking has been a focus area for Mastercard” and, in his view, Finicity is one of three. best players in this area. “We see it as a net positive for Mastercard, as it further strengthens Mastercard’s positioning with fintechs and, given its relationship with banks, gives them the opportunity to scale the platform faster and internationally,” he said.
Sakhrani has a higher rating and a target of $ 371 on the shares.
Shares of Mastercard rose 1.3% in trading on Tuesday. They have recovered 52% in the last three months as the S&P 500 SPX,
It has gained 41%.