Mastercard to acquire Utah-based fintech firm Finicity for £659 million

In a statement on Tuesday, Mastercard Inc. (NYSE: MA) announced plans of acquiring Finicity for £659 million. Founded in 1999, the Utah-based financial technology company works with banks and other financial firms, and offers real-time access to customers’ financial data.   

Shares of the company ended almost flat on Tuesday. At £245 per share, Mastercard is currently more than 1% up year to date in the stock market after recovering from a low of £163 per share in late March. Learn more about how to invest in the stock market.

Dominick Gabriele of Oppenheimer downgrades Mastercard’s rating

Provided that performance targets are met, Mastercard added, Finicity’s existing shareholders will have an opportunity to get an additional earn-out of up to £127.80 million. Dominick Gabriele of Oppenheimer recently downgraded Mastercard’s rating from “outperform” to “perform”.

The financial data provider will contribute to strengthening Mastercard’s open banking services. According to Mastercard, such services are vital for businesses or individuals that wish to practice a broader control over their financial data. Mastercard estimated a significant hit to its Q1 revenue due to COVID-19 in February.

Open banking enables customers to identify means for 3^rd party financial services, including banks and other fintech firms, to gain access to their financial data and offer new services like money management or initiate payments.

Mastercard has a history of investments in this sector. In Europe, the world’s 2^nd largest payments processor had introduced a comprehensive set of open banking solutions last year.

Deal is expected to close by the end of 2020

In the past two decades, Finicity has collaborated with several prominent financial institutions like Wells Fargo & Co, Capital One Financial Corp, Fidelity Investments, and JP Morgan Chase, as per the company’s website.

Mastercard also expressed confidence on Tuesday that the deal will only weigh on its business for a maximum of two years. The transaction is likely to be completed by the end of 2020 and is subject to customary closing conditions, including a regulatory review.

President Michael Miebach of Master commented on the news on Tuesday and said:

“With the addition of Finicity, we expect to not only advance our open banking strategy, but enhance how we support and accelerate today’s digital economy across several markets. Finicity has a proven business, built on partnerships with thousands of banks and fintechs, similar to us. Finicity also shares our commitment to consumer-centric data practices, ensuring consumers have a say in how and where their information should be used.”

At the time of writing, the £246 billion company has a price to earnings ratio of 39.26.