Finicity, a Mastercard company, and Fiserv, Inc., both leaders in open banking technology, are advancing the future of open finance through secure data sharing. A data access agreement between the companies will allow thousands of Fiserv financial institution clients to enable consumers to provide clear and explicit permission to securely share their account information with apps that use Finicity’s open banking platform.

“This data access agreement complements Mastercard’s longstanding partnership with Fiserv, demonstrated by our aligned missions to empower consumers and organizations to permission the use of their financial data for their benefit,” said Ryan Christiansen, SVP, Data Access Partnerships at Mastercard. “The strong payments connectivity between Mastercard and Fiserv via tokenization, traditional processing and beyond extends across infrastructure, applications and services to the secure and highly reliable API connections we’re enabling through open banking.”

Finicity is a leader in signed data access agreements. Through this partnership with Fiserv, a major core banking solution provider, Mastercard connectivity continues to outpace competitors and further diminishes credential use within the ecosystem.

Read more here.

Mastercard is launching a new suite of Smart Payment Decisioning Tools to reduce risk in ACH payments and optimize cost and speed through open banking.

Merchants can now use advanced data analytics and machine learning to make the payment experience safer and smarter for everyone. Mastercard is launching two new Smart Payment Decisioning Tools, Payment Success Indicator and Payment Routing Optimizer, part of Finicity’s open banking suite of services that enables payments and account creation seamlessly and securely.

Read more about this new solution here.

Bob Schukai, Mastercard’s Executive Vice President of Technology Development, New Digital Infrastructure & Fintech, lays out the Mastercard philosophy around the protection of consumer data:

“Strong connectivity is important; however we also know that handling people’s data is an enormous responsibility. We have an obligation to keep our customers’ data secure and we set out four simple principles for the use of data. Consumers own the data they produce every day — and have the right to understand and control how it is shared and used. Ultimately, consumer data should be used to make their lives easier.

If you are building a fintech that is innovating with consumer data, it’s critical to clearly outline a set of privacy standards and data management practices up front. Protect that data using an appropriate set of privacy-enhancing technologies to back your claims. Treat the data of your users as if it was your own.”

Read more here, as Bob drills down into the data principles that guide Mastercard.

The payment landscape continues to shift. The move from cash and checks to digital payments such as ACH (automated clearing house) has accelerated, particularly in high-dollar or recurring categories like rent and utilities. These moves offer benefits for both consumers and merchants – more choice, simpler experiences and greater speed to payment – but they come with a few challenges. 

Unsuccessful transactions create friction in the experience by leaving parties scrambling to find a different way to get a payment through, or it can generate penalty fees for both merchants and consumers. There is always the risk of fraudulent accounts or account credentials being used.

To improve the process, Mastercard today unveiled a new suite of Smart Payment Decisioning Tools that minimize these pain points. 

The new products – Payment Success Indicator and Payment Routing Optimizer – rely on real-time bank data permissioned by a consumer to show payment indicators that raise successful payment completion rates and reduce transaction costs.

When it comes to ACH transactions, Nacha reported that payment volume on the modern ACH Network increased 7.7% in the third quarter of 2021 alone, showing that consumers are becoming increasingly interested in making direct payments from their bank accounts.

With the increasing volume of ACH payments, there are a few hurdles that may potentially slow the increase in adoption, delaying the improved merchant and consumer experience: 

• Settlement risk – Lack of payments visibility leaves merchants exposed to the potential for returns, which disrupt and add friction to a consumer-merchant relationship. When a customer ‘walks away’ from a payment experience, the merchant is unsure of the likelihood of ACH settlement. This has the potential to create a costly return process with added fees and manual intervention or operational costs.
• Security – On occasion, merchants experience failed payments due to a consumer providing false or inaccurate credentials.
• Payment decisioning – Having multiple ACH payment options, such as the payment rail and settlement date, provides consumer choice and minimizes expense. However, lack of greater visibility can introduce risk to settlement. 

Minimizing Payment Failure, Maximizing Cash Flow.

How do these pain points play out in the market? According to Mastercard research, each time an ACH payment fails, the merchant is hit with a fee. Fraud also continues to be a major issue in payments. According to a 2021 AFP Payments Fraud Survey, checks and wire transfers are by far the preferred methods that fraudsters exploit, but ACH debits have seen an increase in fraudulent activity as well. 

Enter the power of open banking. By using consumer-permissioned data, these hurdles can be lowered or even eliminated. 

With Payment Success Indicator, failure risk is mitigated by scoring the likelihood of a successful payment before initiating it. Then with Payment Routing Optimizer, originators are given a recommendation for the most optimal day and payment rail to choose for the highest likelihood of successful settlement at the best cost and speed. 

Better Data, Better Decisions.

With smart data comes better decision-making. This is true in virtually every aspect of life, and it’s true in handling account-to-account payments. Leveraging machine learning and predictive modeling, Payment Success Indicator and Payment Routing Optimizer can help mitigate or eliminate ACH failure. This can increase cash flow and improve the bottom line while also creating a more positive experience for customers.

Consumers are adopting more apps and services that utilize digital checkout and payment options. It’s more important than ever to minimize fees and their associated costs, reduce fraud, non-sufficient funds (NSF) returns and make payment settlement confident and cost-effective. 

By utilizing consumer-permissioned bank insights, Payment Success Indicator will provide payment originators a composite score across 10 future calendar days, as well as an individual score for each of those 10 days. Scoring is based on real-time balance and historical behavioral risk patterns. This system is used to evaluate the likelihood a given amount will settle successfully. 

If there is a high risk of settlement or non-sufficient funds over the given time period, the merchant can then use that information and request an alternative payment method, deny the transaction or assume the risk and proceed.

The analytics engine returns a score separating the risk factors across four tiers, giving merchants the advantage of maximizing the available data before making the decision to initiate a payment:

• Tier 1: Highly likely to settle.
• Tier 2: Likely to settle.
• Tier 3: Less likely to settle.
• Tier 4: Do not process. Errors present.

Each composite score comes complete with weighted reasons accompanying it. Account balance, NSF history, consumer spending and consumer deposits are all factored into the analytics.

Payment Routing Optimizer will make payment rail, cost and payment date suggestions, based on the risk findings by Payment Success Indicator. 

For example, if the balance is available in a consumer’s account to make the payment today, but the analytics determine that it may not be available over the next few days, Payment Routing Optimizer will suggest Same-Day ACH over risking Standard ACH processing. 

This product aims to take the friction out of choosing between digital payment options with future updates of the Payment Routing Optimizer potentially including a debit card option.

Real-World Benefits.

The Bilt Rewards Alliance, a collection of more than 2 million rental homes across the country that lets renters earn highly valuable rewards points just by paying rent, will be the first fintech partner to launch Payment Success Indicator. 

“Our mission is to help renters get the most value out of one of their biggest expenses, and returned payments create significant expense and friction for both residents and landlords,” says Ankur Jain, Founder and CEO of Bilt Rewards. “Payment Success Indicator should significantly reduce the potential for returned payments, delivering a digital payment experience that works harder and smarter for everyone.”

Through smart decisioning analytics, Mastercard is helping financial services innovators and payment platforms change the ACH payments landscape. Increased confidence, minimization of fees, improved profitability and simplified payments. That’s the power of open banking. 

Click here to contact your sales representative for more information on our Smart Payment Decisioning Tools.

Bob Schukai, EVP, Technology Development, New Digital Infrastructure & Fintech at Mastercard and others weigh in on what technological and philosophical advances can be made to make open banking even more effective, inclusive and innovative.

Read more here.

The U.S. lags other countries in open banking, the practice of enabling the sharing of customer account information between banks and third-party service providers. A White House executive order issued last July may give it a domestic push.

In the ongoing discussion, the consumer benefit of account-data portability and control runs up against competitive considerations among financial institutions, new-breed fintechs and data aggregators.

Read the full article here.

InstaMortgage’s adoption of Finicity’s Mortgage Verification Services cloud-based technology took about six months, from shopping around for the best provider, to negotiations, inking a deal and then completing the integration itself.

InstaMortgage founder and CEO Shashank Shekhar (pictured) said his company has done many other integrations, but this one may have been the most critical for his company.

Read the full article here.

Consumers don’t want to go to a branch or to be limited by business hours for a call center to transact and manage their money. Digital channels are offering them the possibility to manage their accounts anytime, anywhere.

This has been confirmed by research conducted by PYMNTS and Finicity, a Mastercard company, which found that more than three-quarters of those who opened a new financial account in the last year used digital channels to do so.

Lisa Kimball, SVP for Open Banking at Finicity, talks with PYMNTS about the acceleration of digital banking adoption.

Watch the video interview here.

Fintech services powered by open banking data are gaining adoption across the banking and financial services industry. Consumers are looking to save time and money and improve their financial health.

Recent industry survey data show us just how comfortable and willing consumers are to utilize technology to manage their finances. These insights also provide some clear indicators into what open banking and fintech will look like in the year ahead. Andy Sheehan, president and COO of Finicity, a Mastercard company, gives a preview of the open banking landscape for 2022.

Read the full article here.