Today, Mastercard is announcing that it has added advanced analytics to its Open Banking platform delivered by its subsidiary, Finicity in the U.S. These analytics can help lenders manage their risk profiles while also adding diverse and inclusive credit models for small business loans as well as ongoing monitoring and expansion of credit card lines.
“Small businesses are increasingly looking for greater choice in how they borrow, pay and manage their finances,” said Jess Turner, Mastercard’s Executive Vice President for Global Open Banking and API. “Open Banking provides lenders the owner-permissioned data and advanced analytics they need to offer more choice in financial services to small businesses, which are the backbone of the American economy.”
Read more about Open Banking for Business and how we’re innovating with our partners here.
Capital is the lifeblood of small-to-medium businesses (SMBs) in the United States, and 52% aren’t getting their financing needs met. Owners are always short on time, but when they apply for a loan, they’re asked to collect a fragmented pile of financial documents from many different sources. It’s a slow process that can give SMB lenders an incomplete picture of the business’s actual financial health. Qualified small business borrowers can be denied access to capital when their finances are depicted by static documents that don’t tell the full story.
If the limited data that legacy processes offer is all lenders have to base their approvals on, there are going to be many unwarranted denials issued in a marketplace of 31.7 million U.S. small businesses. A simple lack of available information can hamper the opportunity for innovative SMB lending partners to serve more customers and grow their portfolios. Fintechs and forward-thinking lending institutions may explore more profitable segments instead, leaving the small business owner with fewer options to fund operations.
Business credit cards remain the number one way small business owners secure funding, followed by small business loans. Owners are increasingly embracing the speed and ease of digital solutions, however. Within the last year, 34% have applied for a loan, and 80% have started using digital channels for operating capital within the last 2 years.
Timing is crucial to a small business owner, and next-gen solutions that match the speed of today’s digital economy are a necessity. When a small business owner can leverage open banking to permission the limited use of their data with an app or service, the next-generation lending experience begins. With Mastercard’s connections covering 95% of deposit accounts in the U.S., we can enable more of your SMB customers to permission their business account data through a fast, simple, secure process.
How Mastercard’s Open Banking for Business is expanding access to capital with smarter data
Building open banking into lending services enables SMB lenders to seamlessly gain insights into business operations in real-time and give the SMB owner a low-friction digital experience. Save them time and give them better access to capital – two priceless assets every small business needs.
Lending to SMBs with the limited data that traditional lending processes offer can be slower, riskier and more expensive. Enabling SMB customers to permission their real-time data can fill in the missing pieces in their financial picture, so lenders can qualify more borrowers and acquire more loans with less risk.
Both lenders and borrowers want a streamlined and accelerated lending process. With open banking data, lenders can cut down on costs and borrowers can get loan terms that are based on their actual financial health, not the limited view that manual processes give. Owners don’t have to collect and send as many documents over non-secure channels or endure extended review periods before receiving a lending decision.
Market fluctuations, seasonal income swings, equipment failure and a host of other concerns can affect how a small business manages its repayment obligations. With teams dedicated to supporting machine learning and artificial intelligence, Mastercard’s Open Banking for Business leverages these capabilities to analyze, detect and categorize up to 24 months of transactions, balances, cash flow, loan payments and NSF histories, delivering a comprehensive view of a business’s finances and its ability to repay a loan.
This is the data that lenders need to acquire more of the small business customers whose complex finances can disqualify them for credit, when their approval is based purely on bureau information and bank statements. Smarter data makes for better lending decisions. It can speed up credit decisioning while enabling accurate, predictive modeling for future payment success, powering new innovations like analytics-enabled business cards with dynamic lines of credit.
With smarter data, risk can be better priced and brought in line with safe modeling, opening up the opportunity to help more small businesses grow and flourish. Data and intelligence work together to complement bureau reports, enabling innovators to identify hidden risk factors and create unique lending products, while giving small business owners truly diverse, inclusive opportunities to access capital with better terms.
Open banking can deliver a low-friction, intuitive experience to busy small business owners, driving growth for your SMB lending portfolio. With the advantage of more data through open banking, innovators can create unique lending products and go to market faster. Microfunding for small manufacturers, seasonal capital for restaurants or any other niche can be developed for and served.
Open banking data makes smarter use cases
The ability to offer customized underwriting for small businesses is only part of the solution. Mastercard’s Open Banking for business adds the ability to open more accounts, manage services and set up payments more effectively, speeding time to market and ease of integration.
Business Financial Management
Small business owners can have numerous accounts across an ecosystem with thousands of banks, fintechs and credit unions, and split between business and personal accounts. Eighty-five percent of them want a consolidated place to check in on the health of their business. Cleaned, categorized data across accounts enables a real-time view for both owners and SMB service providers, with insights that give a welcome advantage in strategic financial planning.
Open more accounts, fund them and set up payments with less fraud risk
With Mastercard open banking technology, grow your portfolio while protecting against fraudsters. SMB owners can permission their data easily and have verified accounts up and running quickly on your platform, limiting exposure to fraud and drop-offs. Verified account and routing numbers reduce cost and manual error, increasing payment success.
Complete Small Business Solutions, Powered by Mastercard
The Mastercard open banking platform provides a trusted technology base and best-practice API connectivity that enables innovators to achieve scale, speed and agility while empowering SMBs to benefit from their financial data. Using data, analytics, predictive insights and solutions for SMB use cases, we enable financial service providers to develop profitable business opportunities with low risk.
Mastercard can support you in creating the right strategy to lend to small businesses and stay competitive in an ever-changing environment. Read the Rise of Open Banking Small Business report here to find out what small businesses are looking for from their financial service technology providers.
*Certain open banking services are delivered by Finicity, a Mastercard company.
Highnote has become the latest Mastercard Engage partner. As a qualified technology partner within the Mastercard Engage network, Highnote can help businesses quickly build and deploy embedded finance solutions at scale. Through this partnership, cardholders can initiate transfers directly in and out of card products powered by Highnote.
This partnership additionally enables customers to not only take advantage of Highnote’s industry-leading ACH origination, card issuance, and money movement capabilities but also instantly verify cardholders’ accounts, with their permission.
“The pandemic accelerated the adoption of digital payments through embedded finance,” says Mastercard’s EVP, U.S. Open Banking, Andy Sheehan. We see this partnership as an excellent opportunity to give consumers and businesses more choice in how they pay for goods and services. We’re thrilled to bring together Highnote and Mastercard teams to allow enterprises to seamlessly embed payments into their existing digital products.”
Take a deeper dive into the innovation of this partnership here.
Mastercard has partnered with upSWOT, a U.S.-based white-label embedded financial platform, to add data for small businesses on upSWOT’s platform.
With the addition of owner-permissioned data from Mastercard’s open banking platform, upSWOT now gives small and medium-sized businesses (SMBs) the ability to link financial data to 200 API-enabled apps. These include accounting, enterprise resource planning (ERP), payroll, ecommerce, Customer Relationship Management (CRM), marketing, and POS business applications.
With this partnership, Mastercard and upSWOT will be able to provide SMBs with a smooth and effective approach to run their operations.
Read more about this innovative partnership here.
Consumer-permissioned data is transforming financial services across virtually all industry segments and geographies.
Ryan Beaudry, SVP, Open Banking Product & Engineering at Mastercard, discusses the need and the vision to deliver both a trusted experience and a platform for innovation, empowering consumers to benefit from their data and powering financial services providers as they reimagine the money experience.
To learn more, visit https://www.finicity.com/open-banking. To request a demo, visit https://www.finicity.com/fintech-demo.
OPEN, EMBEDDED, MODULAR, AND ON A PLATFORM
The rapidly-evolving space of open banking, embedded finance, modular banking and banking as a platform is driving innovators with an API mindset, and the future will see more and more public-facing consumer brands embrace APIs across many industries.
A new report from Mastercard Data & Services looks at the relationship between BaaS and open banking, an aggregated approach to BaaS as it evolves into hosted marketplaces and ecosystems and how banks and fintechs can enable BaaS at scale.
Read the full report here.
With the industry’s rapid adoption of integrative banking frameworks such as consumer-permissioned data access and digital tools, Amount has been selected by Mastercard to help spur innovation across lending, payments and financial management. Through the Engage partner network, Amount now offers new services to its SMB and consumer banking clients that use Mastercard’s open banking capabilities to verify information quickly, including identity, cashflow, checking or savings, and income verification.
“We are proud to partner with Mastercard as part of our effort to progress the financial services landscape forward to a more comprehensive and inclusive open banking system,” says Adam Hughes, CEO of Amount.
Read the full announcement here.
Launched by J.P. Morgan Payments and Mastercard, Pay-by-Bank is an ACH payment that uses open banking, which enables consumers to permission their financial data to be shared seamlessly between trusted parties to let them pay bills directly from their bank account with greater security. No longer will they be faced with the tedium of typing in routing and account numbers each time they need to pay a bill. For billers and merchants, it automates consumer onboarding and reduces the risk and cost of storing bank account information.
Pay-by-Bank holds huge potential for billers to take the pain out of recurring payments such as rent, utilities, payments to government, tuition, insurance, and health care where ACH is the primary medium of payment.
Read more about this secure, streamlined open banking innovation here.
In today’s digital age, consumers have come to expect experiences that are quick, convenient and easy to use. These expectations are exerting more pressure on the mortgage lending process and causing many lenders to rethink their current workflows and customer experience.
In this video, we discuss the effects that open banking and real-time data are having on mortgage lending, and how industry innovators are using this data to streamline homebuying for both lenders and borrowers. Join us to talk about the impact of Freddie Mac’s release of automated assessment of direct deposit income, insights into how the leveraging of new data sources will impact future underwriting and how lenders like Intercoastal Mortgage are already utilizing these tools to win in a tightening market.
To learn more, visit https://www.finicity.com/mortgage. To request a demo, visit https://www.finicity.com/mortgage-demo.
Once driven by early adopters like fintechs and tech enthusiasts, open banking is increasingly becoming embedded into the global financial landscape online and through apps from players across the ecosystem. And it is only expected to grow. From 2021 to 2026, the number of open banking users is expected to increase nearly eightfold. And instant payment flows enabled by open banking are expected to increase by 30 times.
Open banking allows for all boats to rise — including merchants, fintech innovators, large and small financial service providers and, most importantly, consumers and small businesses.
Jess Turner, Executive Vice President, Open Banking and API at Mastercard talks about the choice, innovation and inclusion in open banking that is lifting up opportunities across the entire ecosystem. Read here for more.