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The Top Ten Biggest Fintech News Stories of 2020

It was a tumultuous year with the pandemic impacting fintech companies in different ways but here are the stories we think were most important

December 30, 2020 By Peter Renton Leave a Comment

As the sun sets on 2020 and we look back at this past year nearly everything is viewed through the lens of the pandemic. Many fintech companies did surprisingly well while others, particularly in the lending space, struggled. When we look at the year as a whole we see that it was M&A activity that consistently showed up in the news, some related to the pandemic, some not. But the biggest story 0f the year, in my opinion, was how fintech came to the aid of millions of small businesses in the PPP. Here are my top fintech news stories of 2020 (with my usual focus on lending and digital banking):

1. With the PPP Fintech Comes of Age

Rob Frohwein, CEO and Co-Founder of Kabbage, said it best on the LendIt keynote stage this year: “Kabbage was built for the PPP”. So, it was was for many fintech lenders in the small business space. Tasked with having to develop new systems for the Paycheck Protection Program in a matter of days, rather than months, the fintech industry responded and helped provide a huge number of small businesses with the loans they needed, saving millions of jobs in the process. It was not just Kabbage, we had Cross River Bank and Square as well as the loans marketplaces like Lendio leading the way.

2. Intuit to Acquire Credit Karma for $7 Billion

Credit Karma has almost singlehandedly increased the awareness of credit scores for tens of millions of Americans over the last decade. Intuit realized the value in the incredibly rich dataset that Credit Karma has created and wanted that, and the huge customer base, for themselves. And they were willing to pay to the tune of $7.1 billion. In the end this deal closed for $8.1 billion earlier this month with Credit Karma having to divest their fledgling tax preparation business, it was sold to Square for $50 million. For more on this deal read this interesting piece in Fortune.

3. Visa to Buy Plaid in $5.3 Billion Deal

[Read more…]

Consumer Lenders Shed Light on the Current Crisis

A recap of last week's virtual panel on How Consumer Lenders Are Responding to the Crisis

April 21, 2020 By Todd Anderson Leave a Comment

While most of the fintech world has been focused on small businesses since the onset of the crisis there is also significant challenges happening in the consumer lending market. On Friday of last week we hosted a virtual panel on How Consumer Lenders are Responding to the Crisis to get a better understanding as to what these lenders are facing.

The panel featured Anand Devendran, GM – Personal Loans, Credit Karma, Todd Nelson, SVP Strategic Partnerships, Lightstream, Tom Burnside, CEO & Co-Founder, LendingPoint, Abhinav Anand, Head of Consumer Lending, Marcus by Goldman Sachs with LendIt’s Co-Founder & Chairman Peter Renton moderating.

The panel covered a few key themes starting with how lenders are helping borrowers that are no longer working due to being furloughed or laid off. All the lenders have increased their capacity to handle the large increase in call volumes and most have also implemented a self service option so borrowers can set up deferments. Some like Credit Karma have gone so far as setting up a relief roadmap to provide borrowers with the best information so they can make the most informed decision possible.

Adjusting underwriting criteria was a central theme as lenders have tightened up on who they lend to, particularly if they were not focused on the prime and super prime borrowers. Unlike on the small business side consumer lenders are still open for business and LendingPoint has even seen an uptick in their home improvement lending business with so many people at home. Consumers have also been worried about how their credit reports will look after the crisis ends, most lenders are not reporting non-payments and the new legislation calls for a change in credit reporting during the current crisis.

Marketing budgets have tightened across the board with lenders wanting to keep costs down and the increased risk there is in the market due to the growing unemployment numbers. Banks have also seen a big drop off in branch traffic which is where they acquire a good amount of leads through various marketing strategies.

The panel featured one of our most engaged audiences ever with about 75 questions being asked during the one hour session. The group took some key questions related to how their businesses are changing so rapidly. Fraud concerns are heightened at a time like this and lenders need to ensure they are more diligent than ever before. Income verification is also one of the toughest issues lenders are facing with so many companies firing employees or temporarily letting people go until some semblance of normal returns.

The session also covered thoughts on direct mail as a customer acquisition channel, manual review in underwriting, increased use of automation and much, much more.

If you’re interested in listening to the entire webinar you can access the recording here.

Upcoming Webinar: How Consumer Lenders Are Responding to the Crisis

Our next webinar will feature leaders in consumer lending who will share how they are responding to the coronavirus crisis

April 15, 2020 By Ryan Lichtenwald 4 Comments

One of the best ways to learn what is going on during the current crisis is to attend live virtual events. Real time information coming directly from the consumer lenders themselves can be invaluable in understanding what’s actually happening in these uncertain times.

Our next webinar as part of LendIt Fintech Digital offerings will focus on consumer lending. We invite you to this free webinar which will discuss how consumer lenders are responding to the current crisis. Panelists include:

Tom Burnside, LendingPoint
Abhinav Anand, Marcus
Todd Nelson, Lightstream
Anand Devendran, Credit Karma
Moderator: Peter Renton, LendIt Fintech

Below are some of the discussion points we will be covering as part of the webinar but we will also dedicate time for audience questions.

How are they working with borrowers who have lost their job?
Explain how your company is prepared to weather this storm.
How are you addressing the increase in inbound call volume?
Expectations as to how much returns will be impacted?
How have they adjusted underwriting?
Have you adjusted how you report non-payments to the bureaus?
What is happening to loan demand?
What marketing are you continuing to do?
Are we seeing consumer credit scores being impacted yet?
What more should the federal government be doing?
When you look forward to the next few months what are your expectations?

Time: Friday, April 17 (10:00am to 11:00am PT/ 1:00pm to 2:00pm ET)

Intuit to Acquire Credit Karma for $7 Billion

The latest fintech mega deal has the maker of TurboTax, Mint and Quickbooks acquiring Credit Karma for a reported $7 billion

February 24, 2020 By Peter Renton 1 Comment

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. [Read more…]

We’re Closer Than you Think to Autonomous Finance

The way consumers access loans is all about to change with this announcement from Credit Karma.

October 23, 2018 By Ryan Lichtenwald Leave a Comment

Autonomous finance isn’t a well known term within fintech, but it may be the biggest innovation in the consumer finance space in recent years. Ken Lin, the CEO and Co-Founder of Credit Karma talked with us recently on the Lend Academy podcast about this concept of autonomous finance, a concept that is slowly turning into reality. This is Lin’s vision for autonomous finance (taken from our recent podcast):

So for us, autonomous finance is a notion that in five years we believe 10% of the population will completely trust the platform to determine what credit cards they should have in their wallet, where their savings account should be and how much to put away for their retirement, based on a very clear set of objectives.

Credit Karma is in the unique position to capitalize on this idea, particularly when it comes to the lending business, which still relies heavily on credit scores. The company has built a platform in which users can track their credit score over time and get suggestions on products based on their financial life. From my perspective Credit Karma has a monopoly of sorts on this business with no other serious competitors at scale. Due to their sheer size and the engagement with their members, Credit Karma is a significant lead generator for the major online lenders that exist today.

We learned that Lin’s vision may not be far off. In the Wall Street Journal yesterday, we learned about Credit Karma’s new technology platform which they are calling LightBox. This new initiative’s purpose is to host credit models of other lending institutions directly on Credit Karma. Credit Karma previously relied on reverse engineering the credit criteria of third parties in order to suggest products to specific consumers. Now users will be able to apply for credit using the last four digits of their Social Security Number, while never leaving the site.

Because of the certainty around gaining access to credit, consumers will be able to view actual credit limits and APRs ahead of time. They will also be able to avoid dings to their credit score as they shop for credit. According to the company, two of the five largest credit card issuers as well as LendingClub and Upgrade have already signed on to the new program.

Conclusion

The idea of autonomous finance will ultimately lead to a more efficient system. It may cut down significantly on the mass mailers which are commonly used in the industry today. The idea that a user can get the best rate from all of the loan providers will be a win for the consumer.

For the companies providing credit the ultimate result is unclear. An installment loan is largely undifferentiated across lenders and a consumer isn’t necessarily going to care who they have the loan through as long as it is a reputable financial institution. With offerings such as Lightbox from Credit Karma, loan providers may be fighting on one thing only: total cost of financing. It will be interesting to see what other companies jump on board as they all consider what their next act is going to be.

Tax Preparation Firms Use Zero Interest Loans As Lead Generator

The new loan product is helping Americans get quick access to cash but it is not entirely free.

January 18, 2018 By Todd Anderson 2 Comments

With tax season around the corner you might have noticed a deluge of Jon Hamm commercials for interest free tax refund advance loans. This is a newer product used by tax preparation firms to build their customer base around tax season.

H&R Block, Jackson Hewitt, Liberty Tax Service and more recently Credit Karma all market interest free advances on your tax refund. The process is simple and the loans are paid back to the tax preparer when your refund comes back from the government.

The process for tax preparers differs slightly from firm to firm. You first need to make an appointment with a tax professional and go into the office since the product is not available online. Credit Karma’s Earlybird Advance product is the only one to offer the advance online. After completing your refund you will then have the option to fill out a refund advance application.

The refund advance application goes through an underwriting process at a partner bank. In the case of H&R Block their prequalification process reads: BofI Federal Bank, the lender for Refund Advance, will evaluate whether you are eligible to apply for the Refund Advance loan based in part on your tax situation from last year and certain eligibility criteria determined by the bank. This offer is not guaranteed, so if your tax situation or other relevant inputs change, your prequalification to apply could change.

The marketing for these loans promise fast cash in the amount of up to $3,000. While that amount is possible applicants are more likely to see far less. Loan amounts can range from $100 to $500 on the lower end to $2,500 to $3,275 on the higher end. Most applicants looking for fast cast after the holiday season tend to use their refunds to pay down debt.

Funds can be applied to a prepaid card for same day use or you can choose direct deposit and get your advance in a day or two. Americans typically have to wait about three to four weeks to get a tax refund from the IRS, while Americans who take the Earned Income Tax Credit or the Additional Child Tax Credit won’t get their refunds until Feb. 27.

While no origination fees apply, nor is there an APR, applicants can expect to be charged by the tax preparation firm for completing the tax refund. As personal finance columnist Susan Tompor points out, when factoring in the cost of preparation and the amount of your refund you will need to ask if the product is right for you.

I don’t think we will see any of the major online lending platforms offering a similar service but it is an interesting new development nonetheless.