Once a cause for concern as possible rivals, fintechs
increasingly are now regarded as partners for banks in a range of business
activities.
From Amex going head-to-head with Visa and Mastercard in
courting fintechs with card perks to Citigroup partnering with IntraFi to
launch Yankee Sweep, here are six recent developments in the industry that
should have banks on high alert.
American Express and i2c
The popularity of ride-sharing and food delivery apps has
led fintechs in the space to offer their own credit and debit cards backed by
Visa and Mastercard. And in April, American Express, which has had some trouble
breaking into the fintech space, announced its new partnership with digital
card platform i2c.
“With i2c, we’re slashing the time for a company of any size
that wants to issue cards riding on our network,” said Mohammed Badi, Amex’s
global network services president.
Amex, Badi said, hopes to increase its share of fintechs'
card spending with the partnership, adding that it will allow the company to
make its card perks available to all types of startups through its network,
including Amex Offers, early ticket access and dining reservations.
Mastercard and machine learning
Mastercard is intensifying its use of the latest machine
learning and data sharing technology in an effort to enhance the performance of
account-to-account transfers. Failed ACH payments that are returned to
customers are estimated to be 2% of all transfers.
“There are trillions of dollars in ACH payments,” said
Silvana Hernandez, senior vice president of digital payments at Mastercard in
New York. “And there are huge pain points for consumers and merchants.”
Since 2020, Mastercard has been leveraging the technology of
open banking provider Finicity, which it acquired for $825 million. The card
network is now adding new products to its digital arsenal, including Payment
Routing Optimizer and Success Indicator, which it plans to roll out later this
year.
Citi and IntraFi
Citigroup has joined forces with brokered-deposit company
IntraFi to launch Yankee Sweep, a new service that will allow corporate and
institutional clients to move excess cash into U.S. branches of foreign banks.
Clients are “aiming to achieve the best possible return
while ensuring an adequate level of liquidity,” said Michael Berkowitz, North
America head of liquidity management in Citi’s treasury and trade solutions
group. “They want to easily move money from one country to another in an
automated way.”
A large corporate client may have more than 100 accounts at
Citi in different countries. Yankee Swap will enable them to move excess cash
across a small number of foreign banks with U.S. branches with just one Citi
account.
H&R Block, MX and Galileo
H&R Block has moved decisively to give its Spruce mobile
banking app a technology boost by forging new partnerships with financial data
platform MX and Galileo Financial Technologies.
Challenger bank Spruce will leverage data enhancement tools
from MX to enhance the customer experience of its mobile banking platform,
while taking advantage of Galileo’s API technology for its debit card, as well
as using other Galileo products to provide early paycheck availability and
overdraft protection.
“We want [customers] to be able to easily, quickly and
reliably access, deposit, transfer and grow their money through Spruce,” said
H&R Block chief financial services officer Les Whiting in a news release.
Visa, Mastercard head to Latin America with fintechs
Strong fintech penetration into the traditionally unbanked
population in Latin America has gained the attention of Visa and Mastercard in
their efforts to expand their reach in the region. Both are now developing
fintech relationships to connect with more consumers.
A third of Latin America’s population of more than 360
million people had digital-only bank accounts or mobile wallets at the end of
2020, providing a significant growth opportunity for Visa and Mastercard,
according to Americas Market Intelligence.
“We’re building our digital footprint by expanding our
fintech strategy into new growth areas,” said Tim Montgomery, Mastercard’s
senior vice president of digital partnerships. “We believe in enabling everyone
to participate in the modern economy with digital-first payment tools, which
fintechs are delivering to consumers.”
Amazon and JPMorgan Chase
Amazon is continuing a two-decade partnership with JPMorgan
Chase as its credit card issuer in a decision that comes as a surprise after
hints that a move was being considered. Millions of customers will now be
spared the disruption of transferring to
a new card issuer.
In mid-2021, Amazon was pursuing options with American
Express and Synchrony, among other issuers, hoping to take over and replace the
co-branded Amazon Prime Rewards Visa Signature credit card. The change of
direction shows how the ground has shifted, with Amazon keen to keep pace.
“Amazon is being extremely diligent and clever in how it
navigates the payments space,” said Neil Smith, head of strategic partnerships
and business development at payment technology company and consultant Forter.
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