Thursday , March 28, 2024

In the Competitive Game of Open Banking, MX Claims a Big Lead With 50,000-Plus Connections

In the ever-more competitive game of payments and open banking, direct data connections matter. On Thursday, MX Technologies Inc. claimed to have more than any other data aggregator, announcing it has exceeded 50,000 links to financial institutions and fintechs.

The 10-year-old company, based in Lehi, Utah, competes with major aggregators such as Finicity Corp., Fiserv Inc., and Plaid Inc. to connect payments apps like Square Inc.’s Cash App and PayPal Holdings Inc.’s Venmo to users’ bank accounts. Fiserv comes in a distant second, at 18,000 links, according to MX’s estimates. Finicity ranks third, with 16,000 connections, while Plaid comes in fifth with 11,000.

The connections, which are increasingly enabled by application programming interfaces, can verify account ownership and balances and enable transfers requested by users. The business streamlines app-based transactions for consumers and is a key part of a financial-services sector known generically as open banking.

The central role such companies now play in payments and online financial services generally led Visa Inc. in January to announce it was paying $5.3 billion to acquire Plaid. Mastercard followed up with an $825-million deal for Finicity.

MX said in its announcement that its connection count had been augmented earlier this year with its acquisition of FileThis, an aggregation engine with links to more than 800 data sources, including financial institutions, insurance companies, and payroll sites.

Caldwell: “A 360-degree view” of users’ financial lives.

MX along with other aggregators have pushed to establish connections to financial institutions via APIs, which are seen as more secure than a so-called screen-scraping technique commonly used in the early days of the business. Screen scraping involves using credentials obtained from users to access their accounts. Recently, the industry has come together to form an association, the Reston, Va.-based Financial Data Exchange, to work out standards for API links,

With APIs, the number of connections an aggregator can complete is likely to matter even more than in the days of screen scraping, observers say, underscoring the importance of MX’s Thursday announcement. There were 4.5 billion Internet-enabled consumers globally in 2019, up from 3.1 billion in 2014, according to data Visa released when it announced the Plaid deal. In 2015, just 18% of these consumers were using one or more fintech apps, but by last year that proportion had ballooned to 75%.

 “MX is partnering with the world’s most innovative brands to connect people with their financial accounts, provide real-time financial information and insights, and present them with a 360-degree view of their financial lives,” said Ryan Caldwell, MX’s founder and chief executive, in a statement on Thursday.

Still, while the sheer number of connections matters, the industry is striving through the FDX group to leverage those links via a scalable API standard the entire industry can use, Stuart Rubinstein, chief executive of the data delivery network Akoya LLC, told Digital Transactions magazine for a story that will appear in the September issue. “One-off data aggregation deals,” he said, “are not scalable.”

Created by Fidelity Investments, Boston-based Akoya was spun off last year and is now owned by Fidelity, The Clearing House Payments Co., and 11 TCH client banks.

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