Mastercard works to become an open banking matchmaker

Mastercard views the push to build scale for open banking — allowing the sharing of financial data with third parties through the use of technology — as something that requires an entirely new network of its own.

The goal is to connect banks with other companies seeking to build partnerships within the financial services industry.

"We're looking at open banking as a new network for Mastercard, one that has financial institutions and data providers on the one side and banks and other uses of that data on the other," said Andy Sheehan, head of U.S. open banking at Mastercard. 

Gabby Jones/Bloomberg

Mastercard last week added its open banking platform to the card brand's Engage network, bringing in partners that provide a range of payments and other merchant services. Mastercard released the open banking upgrade shortly after card rival GoCardless agreed to buy the Latvian data sharing company Nordigen to bolster GoCardless's ability to offer B2B and B2C open banking use cases, suggesting a competition to build bulk among open banking providers.

"We can get our product out in the market quickly with these partners," Sheehan said. 

Open banking allows consumers or businesses to access services from multiple companies through a single relationship or enrollment. Given the pressures of economic stress and inflation, open banking is being pushed as a way to support faster payments and other services that help customers manage their financial positions.  

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"There's a switch to a more outcome-based service that's driving new open banking moves," said Jacob Morgan, a principal analyst at Forrester Research.

New deployments can string together a series of steps such as invoice presentment and payment, along with links to security, accounting and other business functions through a series of open banking hookups, Morgan said. 

"There is also a stress to see accounts as people and companies come under more duress during inflation or economic challenges," Morgan said. "There's a utility side to this in that this data helps businesses keep on top of their financial position and be able to act on that." 

Mastercard's initial open banking partners are Dwolla, Fintech Automation, i2c, Link Financial Technology, LoanPro, Nova Credit, Provenir, Synctera, Tern and Usio. These companies cover different types of financial technology. Dwolla offers payments, for example, while LoanPro and Nova Credit provide small-business lending. 

"Each of these companies bring their focus and can integrate with our services," Sheehan said. "By choosing to leverage open banking alongside our other networks, these companies can also take advantage of the payment network that Mastercard has built."

The partnerships are designed to reduce the number of individual contracts required for connections between customers, fintechs and Mastercard. The range of open banking partners, which Sheehan said will likely grow quickly, will cover different use cases such as expediting payment processing and streamlining lending.

Mastercard's Engage platform has about 150 partners, covering more than 250 million accounts in aggregate for services such as digital payments, tokenization, digital wallets and mobile point of sale. Mastercard in 2020 acquired Finicity, a financial services data management company that connects to business programs such as Quickbooks, to boost the card network's open banking program. Visa around the same time acquired the account aggregator Tink to round out Visa's open banking program (Visa had earlier attempted to purchase Plaid).

Plaid and payment fintech Stripe, which have partnered for years, more recently sparred over Stripe's entry into account aggregation, which positions Stripe to offer open banking. Banks are also using open banking to help manage security and compliance risk through data sharing. 

One of Mastercard's initial partners, Dwolla, has at times positioned itself as a card alternative, offering account-to-account payment services as an alternative to paying the card networks' rising payment fees. But Dwolla also contends its partnership with Mastercard and the card brand's Finicity unit will improve payment processing for customers that are struggling with economic challenges. 

"Supply chains and logistics are tight right now," said David Glaser, president and chief operating officer at Dwolla. "There's a lot of complications to deliver goods and the movement of funds is a big part of that." 

The collaboration with Mastercard will help Dwolla reach banks that are part of Mastercard and Fincity's network. That will allow Dwolla to participate in a three-party open banking ecosystem that includes banks, which are connected to the Clearing House's RTP rail and data aggregators. Real-time payments can work alongside B2B and consumer billing systems to more closely timing transactions to available balances in the payor's account. Dwolla envisions additional use cases such as alternative payroll schedules that allow people to access their salaries at a time when they need to pay bills.  

"Companies can take advantage of faster payments to do things like pay a supplier as soon as a good is delivered, or support earned wage access," Glaser said, adding Dwolla is also working on open banking connections to aggregators such as Plaid and Yodlee.