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Intuit buys consumer fintech Credit Karma for $7bn

QuickBooks developer Intuit this week sought to broaden its finance portfolio with a $7.1bn bid for Credit Karma, a consumer lending platform catering for individuals in the US, Canada and the UK.

26th Feb 2020
Editor in Chief (interim) AccountingWEB
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August 11, 2019: Intuit Inc. corporation office building in Mississauga, Ontario, Canada. Intuit Inc. is an American business and financial software company.

Since it was founded in San Francisco 2007 Credit Karma has built up a customer base of 100m members to become one of those elusive fintech unicorns worth more than $1bn. According to the Intuit’s market announcement, Credit Karma earned nearly $1bn in unaudited revenue in the year to 31 December 2019.

“Our mission is to power prosperity around the world with a bold goal of doubling the household savings rate for customers on our platform,” said Intuit CEO Sasan Goodarzi.

“By joining forces with Credit Karma, we can create a personalised 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 always dreamed about, pay for education and take the vacation they’ve always wanted.”

The deal will certainly put more cash into the pockets of Credit Karma’s founders and employees. Half of the $7.1bn purchase price will be made in Intuit shares priced at $299.73 on the day of the deal (21 February) and $1bn of that will be earmarked for equity awards that will be expensed over the next three years. Once the transaction closes, Intuit said it would issue approximately $300m in shares to Credit Karma employees.

The Credit Karma system could be likened to the Australian MyProsperity.com platform that emerged from the Xero ecosystem. Both apps pull together all their financial data in one place online, while Credit Karma also offers a free credit check to encourage sign-ups and gives US customers access to a free tax filing program.

The link-up with QuickBooks will expand Credit Karma’s reach to more than 100 financial partners and open the door to artificial intelligence-powered financial assistants to support them with alerts and advice.

“There’s a lot of innovation and investment in fintech, but we don’t see anyone with our collective capabilities, pursuing a personalised financial assistant to help consumers take control of their financial lives,” Goodarzi said.

Cloud Accounting Podcast presenters Blake Oliver and David Leary (formerly a senior Intuit ecosystem evangelist) offered a more cynical take in their latest episode, Debit Intuit, Credit Karma.

While Credit Karma was encroaching on Intuit’s TurboTax market, Intuit has been offering free credit reports from its Mint product for consumers.

“How do they make money?” asked Leary. “My thing on Credit Karma is that it’s all a data play, like Facebook. If you’re not paying for the product, you are the product. It’s obviously $7bn of data that Intuit has just paid for. With Credit Karma, Mint and QuickBooks, Intuit now has a full picture of what you’re doing. Intuit has the ability to disrupt the whole credit rating industry.”

Blake Oliver, meanwhile, flagged up the recent controversy over US taxpayers who were entitled to free filing software who were misdirected to paid products, like TurboTax. “I think they’ll keep it, to satisfy those who need a free file product,” he said.

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