Intuit, the parent company of TurboTax and Mint, agrees to pay US$7.1bn for startup Credit Karma.
Intuit agrees to buy Credit Karma
SAN FRANCISCO: Intuit Inc, the parent company of TurboTax and Mint, agreed on Monday to pay $7.1 billion for Credit Karma Inc, a startup that has become one of the most popular financial applications for young consumers.
The deal, which is being paid for with a combination of cash and stock, is aimed at creating a Silicon Valley financial technology company that can serve as an online financial assistant for people, helping them get their credit scores, file their taxes and find new loans and financial products.
“This is very core to what we’ve declared around helping our customers make ends meet and make smart money decisions,” Sasan Goodarzi, Intuit’s chief executive officer, said in a conference call with analysts.
The acquisition underscores the value of the financial data of ordinary Americans.
Credit Karma grew to be worth billions of dollars by giving people access to their credit scores and then using the information to serve them advertisements for new credit card and loans.
The startup said it had more than 2,600 data points on each of its customers, such as their Social Security numbers and outstanding loans.
The company has been at the leading edge of a large group of financial technology startups that have encouraged younger consumers to make more of their financial decisions online and through their phone. These services, like those offered by social networks, are often paid for through the exchange of data and ads.
Credit Karma says it has 100 million customers, including a third of all Americans who have a credit profile and half of all millennials. That is twice as many total customers as Intuit, which belongs to an older generation of online financial firms and has been looking for ways to appeal to younger audiences and make better use of the consumer data it controls.
The reliance on data could be a sensitive area as regulators become more concerned about the security and privacy offered by companies that control lots of consumer data. Banks have also become increasingly hesitant about allowing companies like Credit Karma to gain access to their customer data.
Goodarzi, though, said on Monday that “consumers are very much willing to consent for their data to be used for their benefit.”
Credit Karma’s decision to sell itself to Intuit pointed to the increasing scepticism that investors have been showing toward tech startups.
Credit Karma had been expected to pursue an initial public offering. But several prominent young tech companies, such as ride-hailing companies Uber Technologies Inc and Lyft Inc, went public last year — and have seen their stock prices fall after Wall Street questioned whether they could make money.
Credit Karma was started in 2007 by Kenneth Lin, who is the CEO, and two cofounders after Lin had trouble acquiring his own credit score.
Signing up for the site became a rite of passage for Americans looking to get their credit score in shape to apply for a mortgage.
Unlike many startups, Credit Karma has a proven business model and reliable revenue. It gets a commission of a few hundred dollars every time someone accepts a new credit card or loan offer that it advertises.
The startup said it had $1 billion in revenue last year, up 20% from 2018.
But Credit Karma’s success has spawned many imitators. Many financial firms now give customers free access to their credit scores. Credit Karma has been trying to expand its offerings and gain access to more customer data by offering new free services like tax filings.
Intuit said that after the deal closed, likely in the second half of the year, Credit Karma would operate independently and remain in its offices in San Francisco.
Lin will continue leading the business. That will mean, at least in the short term, that both companies will offer competing tax-filing services.
But Intuit and Credit Karma said that by joining forces, they hoped to provide a much broader array of financial advice and products, including home loans and insurance.