Yesterday’s announcement of the planned $7.1 billion acquisition of Credit Karma by Intuit represents the impact and the opportunity that fintech presents to more traditional financial services companies.
Founded in 1983, Intuit grew into a global giant by providing accounting, tax filing, and financial planning software and owns well-known brands including QuickBooks, TurboTax, and Mint. Intuit has grown partly by acquiring 30 companies and with more than 50 million product users, the Mountain View, CA company’s annual revenue was $6.78 billion in 2019.
Credit Karma a perfect fit
By contrast Credit Karma is one of the more successful fintech startups after launching in San Francisco in 2007. With more than 100 million users of its credit score, credit card and loan information, tax filing and related services, fintech Credit Karma has innovated and built popular services that generated 20% growth in revenue in 2019.
Investors have poured more than $368 million into the company since 2007 and the company reported annual revenue of more than $1 billion in 2019. Through 2018, Credit Karma had generated more than $40 billion in credit products including credit cards, personal loans, mortgages, automotive financing, and student loan refinancing.
The real value in this deal?
Credit Karma now has more than 100 million users in the US, UK, and Canada including nearly half of all US millennials. The company also claims its customers include more than one-third of Americans who have a credit profile.
While it offers some services for free, a popular appeal to younger consumers, the impressive revenue growth has come by making money on the credit cards, loans and other financial services it offers.
“By joining forces with Credit Karma, we can create a personalized financial assistant that will help consumers find the right financial products, put more money in their pockets and provide insights and advice, enabling them to buy the home they’ve always dreamed about, pay for education and take the vacation they’ve always wanted,” Intuit CEO Sasan Goodarzi said in a company statement.
The real value of Credit Karma to Intuit may very well be in its massive store of data. Analysts have said the combination of Intuit’s financial and tax data with Credit Karma’ credit score data is just one example of a powerful benefit of the combined big data.
VC Sheel Mohnot told The New York Times, the combined company could very well become like a Facebook for financial services. “They would have all of this rich information, and they would basically be an ad network,” he said. “You’re almost forced to advertise with them.”
Intuit will gain access to a broader product mix but equally important a younger demographic in which it can upsell it’s products. Intuit intends to operate Credit Karma independently with it’s current management group in place.
By most appearances, fintech Credit Karma and Intuit look like a perfect fit for both companies with plenty of synergy and growth potential on the horizon.
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