- Intuit just closed its $8.1 billion acquisition of Credit Karma.
- The DOJ approved the deal after Credit Karma sold its tax offering (a competitor to Intuit's TurboTax) to Square.
- The two companies will operate independently, but share their massive sets of income and credit data.
- Sharing data between the two sides will be a key factor in the future of their success, executives said.
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Credit Karma has long been known as the go-to for free credit scores. But since its founding in 2007, the startup has expanded its reach to create a more complete offering. It's since launched savings and checking accounts and a tax filing service for its more than 110 million users.
Its scale and reach proved attractive to Intuit, which announced plans to acquire Credit Karma in February.
On December 3rd, the acquisition closed, contingent on Credit Karma selling its tax offering to Square, which was a requirement of the deal following review by the Department of Justice. Credit Karma Tax had historically competed with Intuit's TurboTax.
The deal ultimately closed for $8.1 billion in cash and stock, $1 billion more than the initial price announced. The adjustment was due to an increase in Intuit's stock price this year and a working capital adjustment related to Credit Karma's value, including $300 million in cash on Credit Karma's balance sheet, a spokesperson told Business Insider.
Together, the companies could become an undeniable force in consumer finance. Credit Karma's store of consumer financial data is huge, as is Intuit's, which has over 50 million W-2s and 28 million 1099's.
"The scale of what we have together is massive," Sasan Goodarzi, CEO of Intuit, told Business Insider. "And in the last nine months, from the time of announcement to close, we've built all of the data pipes."
Read more: Intuit is set to buy Credit Karma for $7.1 billion — here's what the TurboTax owner has to gain from the buzzy startup known for its free credit scores
Data will be key to their future plans.
The companies are looking to "fundamentally transform how consumers achieve financial freedom," Goodarzi said. While Credit Karma will continue to run separate to Intuit, with cofounder and CEO Ken Lin staying on to run things, there will be plenty of overlap between the two sides.
Lin said the deal has the potential to be viewed as a "turning point" for consumers a decade from now thanks to the ability for both companies to pool resources, data elements, and cutting-edge tech.
With more data, Intuit and Credit Karma can offer consumers optimized and cheaper financial products, saving them money and potentially putting pressure on incumbents who charge fees and higher interest rates.
"I think that will level the playing field so that some of the most underprivileged consumers have the same access to technology and products that some of the most wealthy and affluent consumers have," Lin added.
Intuit and Credit Karma will benefit from the scale of the new company
While the companies will continue to operate separately, they'll be able to share data and customer insights, taking advantage of each other's massive scale.
Banks and fintechs have evolved financial offerings and used new sets of data to make credit decisions, but consumers have been left behind, Lin said. As a result, the space has the potential to be transformed, he added.
By helping consumers understand which products they qualify for and why, Credit Karma aims to simplify consumers' financial lives. And it'll will be boosted by Intuit's consumer data.
"We now have the credit profile and the income and assets profile," Lin said. "By the way, these are the data sets that banks are using to determine your eligibility. So now we have it for the consumer."
With that data, Credit Karma can simplify historically complex and manual processes, like applying for credit and refinancing a mortgage. By proactively looking for more cost-effective credit and automating application processes, Credit Karma wants to change the way consumers overpay for financial products.
"Imagine how much better off the consumer will be in terms of cash flow, and in terms of the way they overpay for their financial services products," Lin said. "That's where the industry is, and that's where we think we can bring consumers along."
Read more: $7.1 billion Credit Karma is launching its first checking account, and execs think the new offering could be a key data source for recommending loans
Through Credit Karma Money, for example, Lin is focused on reinventing the checking account, offering an alternative to the fee-bearing accounts offered by traditional banks. And Intuit, which processes $300 billion in tax refunds every year, will only boost Credit Karma's reach.
"That is kind of how consumers stand to benefit. When you bring Intuit into the equation, you really turbo charge it," Lin said.
The two CEOs say the DOJ's antitrust review was thorough
As bright as the future looks for Intuit and Credit Karma, that's not to say there weren't bumps along the way.
Prior to approving the deal, the DOJ required that Credit Karma agree to sell its tax business to Square for $50 million.
Credit Karma Tax, launched in 2017, gave the company insight into users' income data, in addition to their existing credit data. It was a powerful resource for Credit Karma's core business: recommending credit offerings.
And while they weren't initially expecting to sell Credit Karma Tax, the CEOs said they understood, and weren't going to delay the deal on that condition.
"It's certainly not what we were anticipating when we started the deal, but we also went into it with eyes wide open, knowing that we really had to think about every contingency of what the DOJ is going to require and we have to be thoughtful," Lin said.
Read more: Plaid has been quietly building a new payments tool and Visa wants to buy it to squash competition, US antitrust regulators say
The DOJ was primarily concerned with what this deal means for consumers, looking at how it would impact competition in the space, Goodarzi said. Generally, the two CEOs say that the antitrust process was a positive experience, which they said was thoughtful and thorough.
While the DOJ has recently approved other fintech deals, like Mastercard's acquisition of data aggregator Finicity, deals like Visa's acquisition of Plaid have come under antitrust scrutiny.
"We didn't want to get stuck here with the DOJ," Lin said. "We think uncertainty from an investor, a user, and an employee perspectives are terrible outcomes."
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