Will Credit Karma Get Into Lending & Banking?


Today, people can go to Amazon and have food, supplies, and clothes sent to one place in a couple days. Tomorrow, people will go to one place for buying, financing, improving, maintaining, and insuring their home. We don’t know yet if that will be Amazon, but we do know that following the Amazon model of starting with the customer and working backward will be how a winner emerges.

The winner will come from media/tech, fintech, or real estate. And it’s only a matter of which companies have the scale and budget to focus more on the customer end game of a one-stop shop than short-term profit motives of their core businesses.

For example, if you’re in lending, it’s a very capital intensive business which only gets harder when rates rise, so you’re usually in survival mode in a rising rate environment. This means you can’t focus on the fact that your customer is the same customer real estate and home improvement firms are going after.

If you did focus on this, you’d realize that if you got to that customer first, you could control the rest of the funnel by sharing that customer with those other service providers. The customer wins with a one-stop shop and your business wins by diversifying.

Today there are billion dollar businesses that serve as connectors in real estate. Zillow is a great example. They don’t provide the services, but they have mastered getting to the customer first and charge real estate agents and lenders to gain access to the 187 million customers they connect with. Their 2017 revenue was $1.1 billion.

Fast forward a few years and either these connector businesses are actually providing one or more of the services they’re now connecting customers to, or the service providers become masters of customer acquisition. This will come as a result of partnering and M&A.

Another great indication of this trend is heavyweight investor Silver Lake taking over as lead investor in Credit Karma, resulting in a $4b valuation for Credit Karma, which let’s consumers monitor their credit and do their taxes.

They let people do these things for free, and have amassed 80 million customers, including half of all millennials. They make money by charging consumer finance providers to access these customers, and those leads are valuable because of the data Credit Karma has on customers. In lending, the most important things you need to underwrite a loan are income and debt, and Credit Karma has all of this data.

The question becomes: why wouldn’t they provide lending and other financial services to customers instead of just taking a fee for selling access to those customers?

The answer will come soon enough. The Silver Lake deal gives them an IPO reprieve until at least 2019, and also Silver Lake is a massive investor in SoFi, which is a lender.

It’s not a triple jump of a dealmaker’s imagination to plug those two firms together in some way. This is just one example of where all of this is headed.

And coming back to the point, it’s all about making it easy for the customer. You need massive scale, customers, and enough capital to have time to think about a one-stop shop for the customer that covers all housing and/or personal finance needs.

Single service shops—like lenders, real estate firms, insurers, home improvement contractors—will struggle as this scale game matures. Not because they’re not good, but because technology increasingly makes customers expect one-stop shopping. To meet this customer goal, we can expect more deals among media/tech, fintech, and real estate firms.


Credit Karma valued at $4b after Silver Lake takes over as lead investor (HousingWire)

One of these firms will win one-stop shop for housing (TheBasisPoint)

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