27 November 2022

6 Fintech Partnerships for Banks to Watch

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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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