We start out the week with yet another blockbuster fintech acquisition. The Wall Street Journal reported late Saturday that Intuit, the maker of Quickbooks, TurboTax and Mint, is close to a deal to acquire Credit Karma for a reported $7 billion. The deal could be announced as soon as today when Intuit reports earnings after the closing bell. [Update: the deal is now official, here is the press release].
Under the deal Credit Karma would become an independent unit inside Intuit with CEO and co-founder, Ken Lin, remaining in charge. Credit Karma was last valued at around $4 billion two years ago and publicly traded Intuit is valued at around $77 billion. The $7 billion deal is expected to be a combination of cash and stock.
What This Deal Could Mean for Intuit and Credit Karma
Intuit has very strong offerings with Quickbooks for business and TurboTax for consumers. While the personal finance tool Mint was groundbreaking a decade ago it has been left to stagnate since Intuit acquired it back in 2009. There have been precious few new innovations in the past decade. This product also operates in a similar way to Credit Karma in that it makes money by recommending products such as credit cards and personal loans. But Credit Karma has done a far better job of this than Mint has ever done so Intuit clearly sees a lot of upside here.
Not only that but Credit Karma has built deep integrations into many of the leading personal loan providers. And many see Credit Karma as one of the most reliable and consistent sources of high quality borrowers. Mint is a relatively minor channel by comparison. Then, of course, there is the scale. Credit Karma has reportedly more than 100 million users in the U.S., Canada and UK.
The other area of overlap is the tax preparation software. TurboTax has become the industry standard for individuals preparing their own taxes, often for free. Credit Karma introduced their own tax preparation software three years ago and has processed millions of tax returns since then likely eating into the TurboTax domination.
In this head to head comparison from earlier this month Credit Karma Tax compared favorably with TurboTax particularly for those people with less complex tax situations. This must have riled the Intuit folks, who spent a fortune on a Superbowl ad this year. By acquiring Credit Karma they no longer need to worry about this competitive threat to one of their major products.
The one area where there is little to no overlap is on the small business side. While Intuit is a dominant force in small business, Credit Karma has been almost exclusively focused on consumers since its founding with the only exception being business credit cards.
Will Mint Finally Get An Overhaul?
After using Mint for more than a decade for my own personal finances I switched to Personal Capital last year. It has better synchronization with bank accounts and has more robust investing features than Mint.
For many years I have thought that Credit Karma should start a Mint-like service. They have a dedication to user experience, a massive customer base (over 90 million U.S. users) and deep insight into the financial behavior of their customers. But they have shown no interest in going down this route. This acquisition may change that. Probably not in the short term, but in the medium to long term I could see Intuit bringing development and design expertise from Credit Karma over to their Mint product.
The Year of Fintech Consolidation
It looks like 2020 is quickly turning into the year of consolidation with incumbents snapping up established fintech companies in multi-billion dollar deals. We started in January with Visa acquiring Plaid in January and while not really considered a fintech E*Trade is being acquired by Morgan Stanley and now Credit Karma with Intuit. With the public markets looking less attractive I expect we will see many more deals like this as the year goes on.