Auto Loan Analysis, Pt. 1

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Auto Loan Aggregators: Notable Events

Notable events that have taken place in the auto loan industry in the past 12 months, specifically those involving auto loan aggregators, include Inuit buying Credit Karma to create a consumer finance platform to help consumers solve personal problems. Nerd Wallet added a face unlock feature to its app that enables customers to log into their accounts using just their face. Detailed information is available below.

Intuit to Buy Credit Karma for $7.1 billion

  • Intuit, a company that developed TurboTax, Mint, and QuickBooks, announced on February 24, 2020, that it had agreed to acquire Credit Karma for around $7.1 billion in cash and stock. The acquisition of Credit Karma, a company that had nearly $1 billion in revenue in 2019, accelerates the company's mission to help increase prosperity in the world.
  • This is notable for the industry as the acquisition combines two technology leaders that share the goal to help consumers solve personal finance problems regardless of their financial situation, such as managing debt and accessing better loans and credit cards. The two companies will create a consumer finance platform that will function like a personalized financial assistant to simplify the decision-making process for consumers related to their finances.
  • This will help consumers to access the right financial products and advice and leave them better off financially. The platform will utilize artificial intelligence to provide consumers with easy access to information on their personal finances so they can do what is necessary to better their financial health.
  • According to Intuit's CEO Sasan Goodarzi, the acquisition is notable for the industry as it will help bring financial institutions and consumers together in ways that will "lower costs for everyone involved and level the playing field for consumers regardless of their economic status." The move will also "transform the personal finance industry and power the economy."
  • Qatalyst Partners is representing Intuit as its financial adviser, while Goldman Sachs & Co. LLC is representing Credit Karma in the same capacity. The transaction is expected to be finalized in the second half of 2020, after being approved by regulators and meeting other customary closing conditions. Goodarzi said that Credit Karma would remain separate after the deal closes.

MX Raised $100 Million Funding to Process Financial Data

  • On June 25, 2019, MX announced that it had secured a $100 million Series B financing round. Battery Ventures led the financing round, and it brought the total amount raised by MX to $175 million after a Series C funding round of $75 million in 2018. The funding was meant to be used to clean and process financial data.
  • New investors that participated in the funding round included Cross Creek Capital, H.I.G. Capital, and Sorenson Capital. Existing investors in the company include Commerce Ventures, Industry Ventures, Washington Federal, and customers the National Bank of Canada.
  • MX is an aggregator that collects, enhances, analyzes, presents, and acts on data. This event is notable as MX serves over "1,800 financial institutions with financial technology data, including 40 of the top 50 digital banking providers and 15% of banks and credit unions in the U.S."
  • Examples of customers served by MX include Ally, ATB Financial, Hughes Federal Credit Union, and National Bank. The funding was important as it also allowed MX to successfully innovate, grow, and forge new partnerships in the auto loan industry.

LendingClub Acquires Radius Bank

  • The LendingClub Corporation announced on February 18, 2020, that it had agreed to acquire Radius Bancorp and its subsidiary Radius Bank. Radius Bank was recently voted as the best online bank in America, and its cash and stock transaction is valued at $185 million. According to Scott Sanborn, the CEO of LendingClub, it is a transformational transaction that will allow the two companies to "reimagine banking in a way that is free from legacy practices and systems and where the success of LendingClub is aligned with the success of its customers."
  • This is a notable event because, according to PR Newswire, LendingClub is the "first U.S. fintech to announce the acquisition of a bank and the acquisition is poised to reimagine banking." The acquisition will create "a digitally native marketplace bank at scale" that will help provide an integrated customer experience and reduce the cost paid by consumers when borrowing and enable them to earn more when saving.
  • Radius is a leading online bank with over $1.4 billion in diversified assets. LendingClub is the leading provider of personal loans in the U.S. and facilitated over $12.3 billion in loans in 2019. The purchase is expected to be finalized in two years and is subject to approval by regulators and other customary closing conditions.
  • According to Forbes, LendingClub acquired Radius Bank as a strategic move so that it could benefit from the institution's banking-as-a-service and application program interface (API) business. LendingClub said the acquisition will help it to "reduce its use of high-cost warehouse lines and generate more recurring net interest income." LendingClub’s CEO Scott Sanborn also said the acquisition would help reduce funding expenses and banking fees amounting to $40 million per year.

Nerd Wallet Adds Face Unlock Feature to its App

  • Nerd Wallet has added a feature to its app that enables customers to log into their accounts using just their face. This was done in February 2020 and eliminates the need for using passwords and fingerprints. The company has updated its app to add the face unlock feature to implement the newest biometrics API. Face unlocking offers customers a quick and stress-free verification experience.
  • Nerd Wallet accesses, processes, and shares sensitive financial data of many customers who use its platform. It, therefore, has a responsibility to secure the data to prevent it from getting into the wrong hands, such as what happened with the data breaches encountered by many companies. This is a notable event as using face verification will help the company achieve rigid security.
  • According to a study referenced in the Credit Union Times, breaches in 2019 affected financial organizations more than any sector and accounted for over 60% of all leaked records.
  • Face verification is highly accurate, and it is unlikely for criminals to use a photo to gain access, such as when they steal the ID cards of the authorized individuals. Face verification detects minor differences and prevents other people from logging into an individual's account.
  • According to Norton, there were 3,800 publicly disclosed breaches and 4.1 billion exposed records in the first quarter of 2019.

Finicity Partners LendingQB to Optimize Digital Verification

  • Finicity partnered with LendingQB to allow LendingQB’s platform to use its digital Verification of Assets (VoA) solution to quicken the loan processing process and reduce fraud, while ensuring that customers had a more positive and efficient experience.
  • According to Steve Smith, the CEO of Finicity, this partnership is notable as it helps to digitize the loan origination process, which is the future of lending. It also helps the industry "evolve and improve the experiences for lenders and borrowers alike.
  • Verification of Assets "leverages transaction data to help lenders spot underwriting factors that can shave as many as six days off the typical mortgage origination timeline. The solution delivers reports in 30 seconds, and can be refreshed during the origination process."