- TurboTax maker Intuit announced plans to acquire credit monitoring company Credit Karma for $7.1 billion on Monday.
- Intuit CEO Sasan Goodarzi and Credit Karma CEO Kenneth Lin tell Business Insider that the deal will accelerate the growth of both of their companies.
- Intuit has been working to use artificial intelligence to make its tools more personalized, and Goodarzi said acquiring Credit Karma helps them do that faster.
- For Credit Karma, Lin said he found that combining forces with Intuit would help grow the company faster than via an IPO.
- Intuit and Credit Karma do have some tools that overlap, which could put antitrust scrutiny on Intuit for acquiring a smaller rival, but Goodarzi said he doesn’t see that as a concern, because the ultimate goal is to give customers more choice — whether its an Intuit product or a Credit Karma product.
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On Monday, Intuit — the company behind TurboTax, Mint, and QuickBooks — announced plans to acquire credit monitoring startup Credit Karma for $7.1 billion.
It’s the biggest deal in Intuit’s 37-year history and comes just one year after Sasan Goodarzi took the CEO reins at Intuit. And the acquisition is being announced at a time of heightened regulatory scrutiny over antitrust and privacy issues.
But Goodarzi and Credit Karma CEO Kenneth Lin are betting the deal, which they expect to close in the second half of the year, will give more choices to customers and accelerate growth for both businesses.
In an interview with Business Insider on Monday, the two executives discussed the strategy behind the combination.
Intuit has been working to make itself into a platform that works like a digital personal financial assistant for users and it hopes to do that by incorporating artificial intelligence into its products in order to give users recommendations about their specific needs. Credit Karma will help make that a reality faster, Goodarzi told Business Insider.
“This really gives us the opportunity together to create a consumer finance platform that truly acts like a financial assistant in the pockets of consumers … the capability that Ken and his team have created at Credit Karma really helps to accelerate our speed to market,” he said.
Credit Karma was built around the idea of using customers’ financial data to help direct them to the tools that would be most helpful to them. Goodarzi said that capability is key to Intuit’s overall goal. In order to get there they need data about customers so they can build artificial intelligence that directs people to the tools they need, he said.
While some are questioning if this means Intuit’s M&A strategy will become more aggressive, Goodarzi said that’s not necessarily the case. This has less to do with wanting to do more acquisitions, and more about making sure the company is working towards its goal, he said.
“We’re not after mega deals. We’re after really accelerating, solving our customer problems and time to market. And it just so happens that Credit Karma has created something that very few have and together we can accelerate the benefits for customers,” Goodarzi said.
The benefits for Credit Karma
For Credit Karma, said CEO Kenneth Lin, joining forces with Intuit is the best way to keep growing and to provide customers with a broader menu of services.
“When you look at the data assets that Intuit has, the capabilities around fraud, the culture and the alignment of mission that we had, it made so much more sense to work through that relationship than the fundraising mechanism that is the IPO market,” Lin said.
Once the deal closes, Credit Karma will remain a separate entity within Intuit and Lin will continue running the company on his own, while reporting directly to Goodarzi.
Intuit and Credit Karma do have some overlap in capabilities, particularly in the tax-filing space. Credit Karma offers a free tax-filing service to compete with TurboTax and uses a similar model to the one that Goodarzi has envisioned for Intuit. Meanwhile, Intuit has its own Turbo, a free credit-score-checking service to compete with Credit Karma.
Intuit doesn’t plan to get rid of Credit Karma’s competing offerings. Goodarzi said on a call with investors that it will give customers more choice, which will ultimately benefit the whole company.
Potential challenges: data privacy and antitrust
Acquiring a smaller rival with a competing type of software could put the deal in the crosshairs of antitrust regulators, who have begun taking a much harder look at tech acquisitions from Google, Facebook, Apple and other large tech companies.
Goodarzi stressed that Intuit will be very forthcoming with any information regulators ask for during the acquisition approval process and said he doesn’t believe the deal raises any competitive problems.
“In terms of antitrust, this is not an area where we see an issue, because this is about creating more choice for customers and actually creating more competition and having more and more financial institutions really competing for the customer’s business,” Goodarzi said.
Another potential area of concern is growing regulations around consumer data privacy which aim to make sure people have control over the data companies are collecting about them. California’s new data privacy law went into effect this year and Europe’s GDPR law has been in effect for a few years.
Intuit and Credit Karma want to use their combined forces to collect all the financial data they have on a customer and use it to help that person’s experience when looking for financial service tools. Goodarzi and Lin said they don’t see any issues complying with those regulations. Both of their companies believe that customer data should only be used to help the customer and if the customer agrees, they said.
“From a data privacy perspective, this is the customer’s data and we’re just looking to ensure that they benefit from it,” Goodarzi said, adding that he thinks Credit Karma takes it just as seriously.
Lin said, he thinks Credit Karma is ahead of the legislation because they had those principles in mind when they created the company. “In many ways we’re ahead,” he said.
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