The goal of this program is to enable new uses for open banking — which allows third parties to access bank data — and, in turn, support a rise in alternative payment technology, such as digital wallets, that allow direct debits from a consumer's bank account. Last year, $57 billion was paid through open banking globally, according to
With demand for this form of payment rising, it's crucial to deliver a seamless experience while safeguarding sensitive account information, according to Mastercard.
"Consumers have higher expectations for ease, personalization and protections," said Sabrina Tharani, senior vice president of fintech and venture partnerships at Mastercard. "We're in this renaissance where we're trying to understand how we best leverage these new technologies to provide better and more inclusive consumer experiences."
The trouble is, creating open-banking products that are straightforward and user friendly is not so simple. Older payment technology doesn't always play nice with new ones. Fifty-nine percent of surveyed bankers felt legacy infrastructure was a barrier to open banking, according to
Additionally, many of these outdated technologies use a process called "screen scraping" to collect banking data. With this practice, the bank does not control what data is shared, leaving it prone to phishing attacks and other threats. While supporters of a proposal from the Consumer Financial Protection Bureau hope to
Most of these issues stem from a lack of open banking regulation in the U.S. Gareth Lodge, London-based principal analyst of payments at international research firm Celent, said that while it may seem counterintuitive, regulation is actually the reason open banking has grown at a faster rate in Europe and the U.K.
"While regulation is rarely welcomed by banks, here it has had the advantage of at least mandating the standards, the rules, etc., which form the foundations for what comes next," Lodge said. "The U.S. has many examples of open banking and embedded finance — the question is whether there would be more, and growth would have been even faster with regulation."
Visa has its own efforts underway to work with and invest in startups. Visa operates a Fintech Fast Track Program for fintechs of all sizes; an Inclusive Fintech Accelerator program to address the challenges faced by diverse founders; and it has accelerator programs in the Asia Pacific and Central Europe, Middle East and Africa regions, the company said in an email. It also launched a $100 million initiative last year, focused on
Partnering with fintechs is a good way to drive innovation in the U.S. open banking market, said Kieran Hines, principal analyst at Celent. The practice could give credit card networks a leg up over other financial institutions, he said.
"While there are many banks that are actively looking to use open banking to enhance their offerings, partnering with fintechs targeting very specific customer needs is a strong way to build further traction for Mastercard as well as demonstrating the variety of scenarios in which open banking can deliver value," Hines said.
Mark Bechhofer, chief operating officer and co-founder of Quiltt, said his company hopes to integrate data from Finicity — an open-banking platform Mastercard
"It takes a crazy amount of engineering work to just recognize Starbucks transactions from thousands of different stores," Bechhofer said. "Then there's all these services that are doing this, so we lump them and their massive databases together downstream so the consumer can understand exactly what the charge is for."
LinkMoney is also keen to work more closely with Mastercard Open Banking Solutions. The pay-by-bank company has been collaborating with Mastercard since the startup's founding in 2021 to help merchants accept open banking payments.
"We don't have the same real-time money-moving infrastructure access that exists in other markets, like Europe," said Eric Shoykhet, co-founder of Link Financial Technologies, the parent company of LinkMoney. "With that said, the U.S. has a very high cost of payment processing market, and there's a lot of appetite from merchants for cheaper payment methods."
Businesses aren't the only ones using open-banking technology to lower their spending. Bobby Matson, founder of Payitoff, argues that consumers — especially those struggling with student loans — need help managing their finances.
Collectively, Americans owed $17.5 trillion in debt last year, according to a study by the
Payitoff helps consumers pay down their debt by using open-banking tools to connect to other resources. An individual with credit-card debt could potentially receive a list of personal loans or balance transfer credit cards tailored to their financial situation. And student-loan borrowers could receive information about refinancing options, or be directed to federal SAVE plans.
Payitoff plans to use Mastercard Open Banking's resources to continue building out its debt tools, said Matson. The company is also exploring the possibility of creating a new product with Mastercard that would "combine two products to solve a workplace problem," Matson said, adding that more information on this project and other potential collaborations could be released in the coming months.
"I think there's still a lot of opportunity that's yet to be uncovered," Matson said. "We've started with a lot of student use cases and holistic debt management opportunities, but there's even more we could explore in terms of helping unlock financial decisions for their clients."
These fintechs will work with Mastercard Open Banking for the next four months, and another accelerator is already coming down the pipeline. Mastercard is accepting applications for Start Path Emerging Fintech, an accelerator aimed at addressing sustainability, until July 19, according to a
"The program welcomes startups innovating in payments and commerce, but also those building solutions at the intersection of fintech and sustainability, cybersecurity, healthcare, retail, gaming and more," Jackowski wrote.
Start Path is not a traditional accelerator because Mastercard is not buying equity in these companies upfront. The card network will decide on potential investments based on the fintechs' performances during the program, as determined by their sponsor. Tharani, one of American Banker's
"It's not our primary objective," Tharani said. "We're really focused on signing these tangible commercial product deals versus making investments."
