Data for the common good: Open finance in the public sector

While people have debated the role of government since antiquity, there is one thing everyone can agree on: governments work more effectively when their own operations run smoothly, especially when it comes to getting citizens the services and financial support they need.

Open Finance is an ecosystem that connects citizens, businesses, and service providers through secure, consent-driven data sharing. It’s about creating a trusted network where data flows responsibly to enable innovation, broaden choice, and deliver better experiences and outcomes. Whether it’s eligibility verification or disbursements and payments, it operates as a platform that empowers stakeholders while maintaining transparency and trust.

And, these days, the most efficient way to do business is digitally. Most Americans pay their bills using account-to-account payments. In 2024, they paid $11 trillion and that amount is expected to grow 7% annually in upcoming years.[1] To keep pace with the trend, many public sector organizations now accept digital payments for just about everything from student loans to parking tickets. 

Similarly, the U.S. government relies on digital payments to disburse funds to citizens, including tax refunds, Social Security, veterans’ benefits and unemployment checks. More than 1300 financial institutions are connected by FedNow, the Federal Reserve’s instant payment service, and the number of instant payments is expected to grow by 28% annually through 2028.[2]

While digital payments have streamlined many of these processes, new technology can still pose challenges for public sector organizations — especially those that process billions of dollars each year. Security risks are a top concern, as account takeover remains the most prevalent form of fraud.[3] User experience is also an issue: nearly half of Americans report difficulties opening accounts on government websites.[4]

To make these systems run more smoothly and optimize digital payments while reducing risks, scale and connectivity are critical. Mastercard Open Finance connects over 95% of U.S. deposit accounts and supports thousands of apps and services — all backed by Mastercard’s global scale, security, and compliance standards. This means agencies and partners can modernize their payment systems confidently, knowing they’re operating within a trusted, proven network. 

Last year, the government made $162 billion in improper payments, a problem that negatively impacts citizens and public entities.[5]

Mastercard Open Finance’s Account Owner Verification tools can protect citizens and public funds by helping validate that each bank account belongs to the person claiming it. Account Owner Verification confirms consumer-permissioned data directly with the user’s financial institution by matching identification and contact information along with device data to confirm that the user's computer or smartphone hasn’t been previously used to commit fraud. 

In addition to helping reduce fraud, Mastercard’s Open Finance platform makes it easier to link bank accounts and streamline ACH payment disbursements by using bank verified account details instead of relying on manual entry. This also helps alleviate human errors that result in administrative returns.

With Mastercard Open Finance’s verification solutions, citizens can receive their government payments in a timely fashion, which can bolster trust in the government.

Part of living in the United States is making regular, recurring payments to the government for services such as Medicaid or Medicare copayments, automobile tags and, of course, taxes. Speed, ease, and choice are becoming essential to consumers - 78% of consumers say paying directly from their bank account is important when choosing where to shop or make payments online.[6] 

Occasionally, however, someone making a payment to the government may not have the funds immediately available in their bank account. Insufficient funds cost payment cost initiators $10-$35 per occurrence, adding up quickly across high-volume programs.[6]  The experience includes more friction when manual entry of account and routing details leads to ACH returns and friction. And the cost impact is significant: while the average ACH payment costs about $0.29, that number can climb to $1.50 when you factor in returns, errors, and manual reconciliation.[7]

Insufficient funds also can have negative impacts: a late payment may lead to a canceled account or a service delay, and reinstatement can be time-consuming.

Mastercard Open Finance can help assess the likelihood of insufficient funds returns, too. It’s able to check account balances in real time and perform analysis and risk assessment from account data insights to predict the likelihood of a payment settling within a specific amount of time. All this helps to reduce return rates and make sure that bills are paid so that services run uninterrupted.

Reducing fraud leads to a greater sense of security and trust. Everyone deserves a government that runs efficiently.

To learn more, watch our Mastercard on-demand webinar on open finance in the public sector.