Mastercard has launched the latest class for its accelerator.

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MasterCard is grooming a new crop of fintech companies as potential partners to help them keep pace request for faster, safer payments.

The network of cards recently named nine international fintech startups to its Start Path Open Banking and Embedded Finance accelerator program. Three are based in the United States: Link Money, a San Francisco-based bank-to-pay company for merchants; Payitoff, a New York-based debt management provider; and Quiltt, a New York and Dallas-based software company that helps simplify open banking, a Key strategy for Mastercard.

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, which allow direct debits from a consumer’s bank account. Last year, $57 billion was paid through open banking globally, according to Statisticswhich predicts that the figure will rise to $580 billion in 2027.

According to Mastercard, with the growing demand for this form of payment, it is essential to offer a seamless experience while protecting sensitive account information.

“Consumers have higher expectations for simplicity, personalization and protection,” said Sabrina Tharani, senior vice president of fintech and venture partnerships at Mastercard. “We’re in this renaissance where we’re trying to figure out how to best leverage these new technologies to deliver better, more inclusive experiences for consumers.”

The problem is that creating simple and intuitive open banking products is not so simple. Old payment technologies do not always mix with new ones. 59% of bankers surveyed believed that legacy infrastructure was a barrier to open banking, according to Forbes Insights and Thinking Machine.

Additionally, many of these outdated technologies use a process called “screen scraping” to collect banking data.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 vulnerable to phishing attacks and other threats. While supporters of a Consumer Financial Protection Bureau proposal hope to ban screen scrapingFintechs operating in open banking are working to find more secure methods of data collection.

Most of these problems stem from the lack of regulation of open banking in the United States. Gareth Lodge, principal payments analyst at London-based global research firm Celent, said that while it may seem counterintuitive, regulation is actually the reason open banking has grown faster in Europe and the United Kingdom.

“While regulation is rarely welcomed by banks, it has had the benefit here of at least imposing standards, rules, etc., that are the foundation 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 of them and whether growth would be even faster with regulation.”

Visa has its own ongoing efforts to work with and invest in startups. Visa runs a Fintech Fast Track Program for fintechs of all sizes; an Inclusive Fintech Accelerator program to address challenges faced by diverse founders; and 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 companies working with generative artificial intelligenceVisa did not provide further comment on this article.

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 card networks an edge over other financial institutions, he said.

“While many banks are actively looking to use open banking to enhance their offerings, partnering with fintechs that are targeting very specific customer needs is an effective way to further increase Mastercard’s popularity and demonstrate the variety of scenarios where open banking can generate value,” Hines said.

Open Banking Startup Path provides access to Mastercard’s network of banks, merchants and partners around the world. Each company is also assigned a Mastercard sponsor who can help facilitate networking opportunities and direct them to resources.

Mark Bechhofer, Quiltt’s chief operating officer and co-founder, said his company hopes to integrate data from Finicity, a Mastercard open banking platform acquired in 2020, to help other organizations use it as well. It’s critical that open-banking fintechs work together and share data to improve the consumer experience, Bechhofer said.

“It takes a tremendous amount of engineering to recognize Starbucks transactions from thousands of different stores,” Bechhofer said. “Then you have all these services that do that, and then we bundle them together with their massive downstream databases so the consumer can understand exactly what the charge is for.”

LinkMoney is also keen to work more closely with Mastercard’s Finicity. The bank-based payments company has been working with Mastercard since the startup was founded in 2021 to help merchants accept payments through open banking.

“We don’t have the same access to real-time money transfer infrastructure that exists in other markets, like Europe,” said Eric Shoykhet, co-founder of Link Financial Technologies, LinkMoney’s parent company. “That said, the U.S. has a very high payment processing cost market, and there’s a lot of demand from merchants for cheaper payment methods.”

Businesses aren’t the only ones using open-banking technology to cut costs. Bobby Matson, founder of Payitoff, says consumers, especially those struggling with student loans, need help managing their finances.

According to a study by the American Institute of Management and Technology (AOMS), Americans had a total debt of $17.5 trillion last year. Federal Reserve Bank of New YorkThe average adult had $66,772 in debt, with student loans and credit card debt being the top issues.

Payitoff helps consumers pay down their debts 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 referred to federal SAVE plans.

Payitoff plans to use Mastercard Open Banking resources to continue developing its debit instruments, Matson said. 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 that project and other potential collaborations could be released in the coming months.

“I think there’s still a lot of opportunity to be discovered,” Matson said. “We’ve started with a lot of student use cases and holistic debt management opportunities, but there’s a lot more that we could explore in terms of helping them unlock financial decisions for their customers.”

These fintechs will partner with Mastercard Open Banking for the next four months, and another accelerator is already on the way. Mastercard will accept applications for Start Path Emerging Fintech, an accelerator aimed at addressing sustainability, until July 19, according to a Posts on LinkedIn by Ellen Jackowski, Chief Sustainability Officer and Executive Vice President, Mastercard.

“The program welcomes innovative startups in the fields of payments and commerce, as well as those developing 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 does not purchase shares in these companies up front. The card network will decide potential investments based on the fintechs’ performance during the program, as determined by their sponsor. Tharani, a member of American Banker Most Influential Women in Subsequent Payments honorees for 2023, Mastercard said it holds stakes in less than 50% of the companies participating in Smart Path programs.

“That’s not our primary focus,” Tharani said. “We’re really focused on signing these tangible agreements on commercial products, rather than investing.”

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