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FinTech Watchlist Company Profile—Credit Karma Personal Finance Company Credit Karma Demystifying the Credit Landscape by Offering Free Credit and Financial Management Services Global Digital Transformation Research Team at Frost & Sullivan
9ABC-63 July 2018
Contents Section Executive Summary
Slide Number 4
Executive Summary
5
Snapshot
6
Business Overview
7
Business Overview
8
Solutions Offered
10
Business Performance
11
Investment Received
12
Strategic Imperatives
13
Business and Disruption Model
18
Credit Karma’s Business Model
Challenges
Challenges Faced by Credit Karma
Impact Analysis
Impact on Financial Services Industry
9ABC-63
19 20 21 22 23
2
Contents (continued) Section Credit Karma’s Team
Credit Karma’s Key Personnel
Conclusion
Conclusion
Appendix
List of Exhibits
The Frost & Sullivan Story
9ABC-63
Slide Number 24 25 27 28 30 31 32
3
Executive Summary
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4
Executive Summary
Credit Karma?
• Credit Karma is the firstever platform that provides consumers with truly free credit report, credit scores and credit monitoring without any hidden costs and obligations. • The company leverages the credit data collected from members in order to provide highly personalized recommendations to its members and matching them with suitable financial products. • The company has a user base of 75 million as of December 2017.
Does it complement, extend or disrupt the market?
• The company is disrupting the traditional consumer credit reporting and monitoring market which was once full of hidden fees and opaque fine prints. • With the launch of its free tax e-filing service, the company is also disrupting the tax preparation industry. • However, it complements the financial services industry by matching the right financial products with the right consumers who are more likely to be approved.
What is Credit Karma’s impact on Financial services industry?
• Credit Karma is likely to have low to medium impact in more than $13.15 trillion market in the United States, that includes: o Household debt market of $13.15 trillion o Tax preparation market of $8.9 billion • Credit Karma is changing the traditional mode of acquiring financial products. Instead of purchasing directly from financial institutions, it attracts customers to purchase products through its platform.
What can traditional players do to avoid disruption?
Banks can look to: • Attract consumers by providing complementary services. • Use data analytics to collect and process members’ data in order to match them with more suitable products which suit their needs. • Offer simple and transparent products which are simple to understand and apply. • Automate and simplify the application process for its financial products.
Source: Frost & Sullivan 9ABC-63
5
Snapshot
$500 million+
More than
75 million
revenue in 2016 and has grown 50% compared to previous year
members1
700+ Number of Full-time Equivalent Employees2
Headquarter San Francisco, the United States
Founded since
$367.5 million
2007
Investment received till date1
3
Focuses on providing main recommendations
All services provided are
Credit cards
for all consumers
Loans Auto 1. As of Dec 2017 9ABC-63
2. As of June 2017 3. As of June 2015
Free Valued at
$3.5 billion
3
Source: Credit Karma, Frost & Sullivan 6
Business Overview
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7
Business Overview Credit Karma was founded to help people better understand their finances and to offer access to more suitable and better financial products.
Fintech company at a glance
Key Financials and Other Data as on December 2017
Company Name
Credit Karma
Revenue
$500 million in FY 2016
Headquarters
San Francisco, the United States
Number of Members
75 million
Company Type
Private
Employees
700+
Industry Subsector and Sector
Personal Financial Services
Total Investment Received
$367.5 million
Website
www.creditkarma.com
Key Competitors
NerdWallet, Credit Sesame, Credit.com, Lending Tree
Credit Karma’s Key Milestones
In March 2008, started offering free credit scores. In November 2010, Credit Karma hits 1 million members. In December 2016, launched Credit Karma Tax.
Founded on March 2007 by Kenneth Lin, Ryan Graciano and Nichole Mustard.
Strategic Imperatives
In November 2009, received first investment of $2.5 million.
2
In 2015, Credit Karma began its “My Money Story” campaign. In December 2017, Credit Karma hits 75 million members.
Diversify Complementary Product Offerings
1
3
Business Expansion
Increase Brand Awareness
Source: Credit Karma, Frost & Sullivan 9ABC-63
8
Business Overview (continued) Credit Karma offers free services that consumer can benefit without paying anything. Additionally, it offers the following free benefits: Free access to credit reports anytime from TransUnion and Equifax, with weekly updates. You can dispute any credit report errors or discrepancies directly through a simple online process.
Credit Report Direct Dispute
Credit Score
Provides free credit scores from TransUnion and Equifax.
Credit Score Factors
Grades on each of the factors that impact your credit score (that is, credit card utilization, payment history).
Credit Monitoring
Alerts you on any important changes on your TransUnion or Equifax credit reports.
Credit Score Simulator
An educational tool which shows you how your financial actions (that is, new credit card) might impact your score.
Unclaimed Money
Credit Karma helps you to discover if you have unclaimed money for free.
Free Tax Filing
Offers completely free e-filling of your federal and state taxes. Credit Karma’s Team
Key Markets Disrupted The company sets to disrupt and re-engineer the billion-dollar consumer credit reporting and monitoring market. The company also steers up the tax preparation industry by offering free tax filing service without any income limits. Image Source: Credit Karma, LinkedIn 9ABC-63
Kenneth Lin
Ryan Graciano
Chief Executive Officer Founder
Chief Technology Officer Co-Founder Source: Credit Karma, Frost & Sullivan 9
Solutions Offered Credit Karma tailors financial product recommendations and targets its advertisements based on each user’s credit profile and user data available with it. Personalized Recommendations
Accounts
Collections
Public Records
Tax Filing
• Robust Analysis • Algorithms
Credit Cards
A variety of credit cards to cater different needs (that is, balance transfer, low interest, cash back, student)
Loans
Personal Loan, Home Loan, Auto Loan, Business Loan, Student Loan
Auto
Auto Insurance, Auto New Loan, Auto Refinancing
Credit Inquiries
Help members to save money “Our goal is to be the best product in the whole spectrum of financial-services products that consumers could use help on.” - Kenneth Lin, Founder and CEO, Credit Karma Source: Credit Karma, Frost & Sullivan 9ABC-63
10
Business Performance Credit Karma has more than 75 million members as of December 2017.
Credit Karma Profile: User Base, US, 2011–2017
70
75
175.0%
60
75.0%
30
80
81.8%
42.9%
0
35
20
11
20 10
120
60
40
50
50
160
25.0% 40 20.0% 0
2011 2012 2013 2014 2015 2016 2017 User Base
Year-on-year Growth
Credit Karma Profile: Revenue, US, 2014–2016 Revenue ($ Million)
600 500 500 400
350
300 200
200 100 0 2014
2015
2016
Year-on-year Growth (%)
200
4
User Base (Million)
80
• Credit Karma’s user base has grown aggressively since launching its free credit scores in 2008, growing at a compound annual growth rate (CAGR) of 63.0% from 2011 to 2017. • In 2012, Credit Karma’s user base grew the most, at a rate of 175%, after the launching of its free daily credit monitoring and its first mobile app on iOS.
• As of December 2017, Credit Karma has gathered over 75 million members, serving more than one-third of all the United States millennials and nearly one-third of all Americans with credit reports. • The company claims that it has been profitable for the past 2 years (2015 and 2016) and reported revenue of more than $500 million in 2016 - an increase of about 50% from last year. • Credit Karma’s valuation increased from $1.0 billion in September 2014 to $3.5 billion in June 2015. Source: Credit Karma, Frost & Sullivan
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11
Investment Received Credit Karma had received a total investment of $367.5 million till December 2017.
Credit Karma Profile: Total Investment Received, US, November 2009–June 2015
Nov 2009
(Series B)
(Series C)
Investment: $30.0 Million Investor: Ribbit Capital, Felicis Ventures, Susquehanna Growth Equity
Investment: $75.0 Million Investors: Google Capital, Tiger Global Management, Susquehanna Growth Equity
Apr 2013
Mar 2014
Sept 2014
June 2015
(Series A)
(Series C)
(Series D)
Investment: $2.5 Million Investors: QED Investors, SV Angel, Founders Fund (FF Angel), FF Angel, Aydin Senkut, Felicis Ventures
Investment: $85.0 Million Investors: Ribbit Capital, Google Capital, Tiger Global Management, Susquehanna Growth Equity
Investment: $175.0 Million Investors: Valinor Management, Tiger Global Management, Viking Global Investors LP
Source: Credit Karma, Frost & Sullivan 9ABC-63
12
Strategic Imperatives
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Strategic Overview Credit Karma has continuously added new products and strengthen client relationship to grow at rapid pace.
Mission
Strategic Imperatives
Creating a platform to help consumers improve their financial health and serve as a one-stop shop for financial products. It aspires to become the “Amazon of personal finance”.
Bringing transparency to consumer finance and gain trust of consumers by offering diversified complementary service offerings.
“We have a mission at Credit Karma to make every consumer their best financial self. So however you define what your best financial self is, we want to create those tools and give you the functionality to improve whatever situation you aspire to. – Kenneth Lin, CEO and Founder of Credit Karma, Apr 2016.
Business Expansion
Increase Brand Awareness
Diversify Complementary Product Offerings
Source: Credit Karma, Frost & Sullivan 9ABC-63
14
Strategic Overview (continued) Complementary product offerings has been one of the key attributes to signing up new members.
Diversify Complementary Product Offerings The company wants to go beyond offering credit score and has set its mission to be a digital financial assistant. Thus, Credit Karma continues to add new free features and products in order to capture larger user base.
March 2008
Free Credit Score
Offers free credit scores to consumers.
January 2012
Free Daily Credit Monitoring
Credit Karma launches its free daily credit monitoring and its first mobile app on iOS.
July 2014
Free Full Credit Report
Partners with additional credit bureau and provides full credit reports and credit scores from two of the three major credit bureaus in the United States for free.
December 2016
Free Tax Preparation & Filing
With the acquisition of AFJC Corporation (a provider of online tax preparation), it launched Credit Karma Tax which provides free federal and state tax preparation, along with free e-filing. Approximately, three million people have started using Credit Karma Tax (as of Jan 2018).
May 2017
Credit Karma Unclaimed Money
Provides free service for members to search for unclaimed money that belongs to them. It streamlines the process by combing through state databases for members. Source: Credit Karma, Frost & Sullivan
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Strategic Overview (continued) Business Expansion
November 2016
Credit Karma took a step further to grow its business by expanding into new geographies in order to gain access to fresh market and additional pool of customers.
1
Credit Karma expands to Los Angeles, opening its first office outside of its San Francisco headquarters. It also hires additional staff who are mostly software engineers.
2
Credit Karma increased its footprint by expanding into Canada. Its services will be available in the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island and Saskatchewan. Credit Karma becomes one of the largest providers of free online credit scores and credit reports in Canada. As of September 2017, Credit Karma has almost one million members in Canada.
December 2016
Entered in Charlotte, North Carolina in its efforts to establish a long-term presence on the East Coast. The Charlotte office focuses on Credit Karma’s free online tax preparation service.
May 2017
After operating out of co-working space for 6 months in Charlotte, Credit Karma officially moved into its new first East Coast office in Ballantye which has a Star Wars theme.
“Since our founding nine years ago, many Canadians have asked for Credit Karma, which made selecting Canada as our first market outside of the U.S. a natural decision” - Kenneth Lin, CEO & Founder, Credit Karma Source: Credit Karma, Frost & Sullivan 9ABC-63
16
Strategic Overview (continued) Increase Brand Awareness
Credit Karma advertises through multiple mediums, including billboard, television advertising and digital marketing. This marketing strategy has helped the company to increase its brand awareness in short time and to attract more users to its platform.
Nationally-aired television commercials
Credit Karma is well-known for its quirky commercials. It has nationally aired hundreds of TV commercials, mostly produced in-house, featuring Credit Karma employees. Its very first TV commercial was aired nationally in December 2011, broadcasting that Credit Karma is a truly free credit scores provider.
In January 2018, Credit Karma secured a 45 seconds Super Bowl Spot to air its commercial about Credit Karma Tax. As Super Bowl is often the most watched television broadcasts in the United States, this will help Credit Karma to reach out to more users.
#MyMoneyStory Campaign In 2015, Credit Karma launched its “My Money Story” campaign which encourages people to share their financial journeys, hoping that this will raise people’s financial awareness and break the taboo of discussing financial matters. As part of the campaign, Credit Karma produced a number of videos which feature individuals sharing about their personal financial experiences. These videos are accessible on Youtube and has changed people’s shyness toward discussing about money and debts. Source: Credit Karma, Frost & Sullivan 9ABC-63
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Business and Disruption Model
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Credit Karma’s Business Model Key Takeaway: Credit Karma offers free service to its consumers. However, it makes money from partners by charging a fee for advertising their products to the consumers. How Does Credit Karma Earn Money? Free Credit Scores , Reports and Tools
Personalized Recommendations
Get Paid by Partner Companies
Free access to credit scores and credit reports along with other free financial services in the platform.
Analyses members’ credit profile to offer personalized product recommendations.
Credit Karma gets paid by banks or lenders if members get a product through the recommendations.
• Offers free insights to attract audience. • Collects members’ financial information. • By offering free tax filing, Credit Karma can monitor users’ finances even better by collecting more credit information of the user.
• Recommendations are made based on powerful algorithms and robust analysis. • This is done by implementing real-time Big Data analytics. • Better match of consumers to the right services from the right financial advertisers.
• This is Credit Karma’s “win-win-win” business model. • When there is a successful match, Credit Karma makes money, members save money and the bank gets a new customer.
Source: Credit Karma, Frost & Sullivan 9ABC-63
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Challenges
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Challenges Faced by Credit Karma Key Takeaway: Increased Competition and Law Suits Filing Against it are the key challenges faced by Credit Karma.
Increased Competition • Credit Karma’s business model is simple, resulting in the up rise of many players with similar business model. Many players in the credit reporting industry offer free credit reports, scores and credit monitoring. Even Experian, a credit bureau, is offering free credit reports. • Credit Karma faces direct competition from Credit Sesame, Nerdwallet and Credit.com. They have very similar business model, if not the same, as that of Credit Karma. • Additionally, Credit Karma is facing indirect competition from platform like Lending Tree, one of the leading online loan marketplace which also offers free credit score alongside with their service.
Law Suits • Credit Karma was sued by the Federal Trade Commission (FTC) for misrepresenting the security of its mobile apps and its failure to secure the transmission of consumers’ sensitive personal information from its mobile apps. • The FTC alleged that Credit Karma left consumers’ sensitive personal information at risk by failing to take reasonable steps to secure their mobile apps.
• It was alleged that Credit Karma failed to implement an important encryption process, known as Secure Sockets Layer (SSL) certificate validation which verifies secure apps’ communications, making the application vulnerable to attacks. • Credit Karma reached a settlement with the FTC on these charges in August 2014. Source: Credit Karma, Frost & Sullivan
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Impact Analysis
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Impact on Financial Services Industry Credit Karma is likely to impact more than $13.15 trillion market.
Credit Karma Profile: Impact Analysis, US, 2017 Credit Karma’s Products
Free Credit Report, Credit Score and Credit Monitoring
Free Tax Preparation and Filing
Potential market that Credit Karma can impact
$13.15 trillion (CY 2017)
$8.9 billion (CY 2016)
Magnitude Strength of Impact1 of Impact2 Impact Analysis
LowMedium
LowMedium
High
• Credit Karma is the first company that offers truly free credit score, credit report and credit monitoring, winning trust from millions consumers. • This pro-consumer approach and the offer of complementary services disrupts the credit reporting industry which was once rife with hidden fees and opaque fine prints. • Credit Karma leverages data collected from its broad user base to recommend the right products that suit each member’s needs and credit worthiness. • It targets the trillion dollars US household debt market, capturing a portion of the major revenue streams from financial services.
High
• Credit Karma stormed the $8.9 billion tax preparation industry by launching its very own free tax filing service. • Due to Credit Karma’s built-in brand loyalty and trust with customers, this tax product is proved to be popular. • In the last tax season (April 2017), 1 million tax returns were filed through Credit Karma Tax and this has increased to 3 million people in the current tax season (January 2018).
Note: 1. Magnitude of impact refers to portion of market that can be impacted. For example, Credit Karma is targeting the millennials population, then it can only impact that segment and hence qualitatively its magnitude of impact is assessed at low to medium. 2. Strength of Impact is Frost’s assessment of company’s ability to grab customers in the segment. For example, Credit Karma’s pro-consumer approach and attractive “win-win-win” business model has higher chance of securing customers than traditional player and hence it is assessed as high.
Source: Credit Karma, Frost & Sullivan
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Credit Karma’s Team
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Credit Karma’s Key Personnel Name
Kenneth Lin
Ryan Graciano
Position
Description
Chief Executive Officer & Founder
• Ken spent his early career working with Upromise and Eloan.
Chief Technology Officer & Co-Founder
• Ken also founded Multilytics Marketing in 2006. • He holds a B.A. degree in Mathematics and Economics from Boston University.
• Ryan grew Credit Karma’s engineering department from a one-man band into a team of hundreds, developing a technical framework to support the company’s rapid growth. • Before joining Credit Karma, Ryan held a position in IBM for 5 years. • He holds a Bachelors degree in Computer Science from the Georgia Institute of Technology. • Responsible for the company’s financial planning, forecasting, record keeping and risk.
Joseph Kauffman
Chief Financial Officer
• Prior to joining Credit Karma, Joseph served as a Chief Financial Officer for TAL Education Group for 4 years and has also worked in New Oriental Education & Technology Group and the Coca-Cola Company. • He holds an MBA in Strategy, Finance and Accounting from Harvard University.
Image Source: Credit Karma, LinkedIn
Source: Credit Karma, Frost & Sullivan 9ABC-63
25
Credit Karma’s Key Personnel (continued) Name
Nichole Mustard
Position
Chief Revenue Officer
Chief Marking Officer
Description
• Nichole oversees Credit Karma’s business development team in finding the right mix of financial partners and optimizing data science and business intelligence capabilities. • Prior to joining Credit Karma, Nichole spent 5 years as a Financial Service Sales Director at Compete, growing the company’s national profile.
• Greg oversees Credit Karma’s marketing department, making sure that the marketing, communications, consumer analytics and brand teams are in line with the company’s value.
• He was previously VP of Marketing Operations at Multilytics Marketing. • He graduated from University of Nevada-Las Vegas with a Master Degree in Electrical Engineering.
Geg Lull
• Nikhyl oversees product development and innovation in the company.
Nikhyl Singhal
Chief Product Officer
• He held several senior product roles for 4 years at Google. • Nikhyl was the CEO and co-founder for SayNow and Cast Iron Systems. He was also the co-founder and Director of Engineering. • He holds a B.S. as well as M.S. in Computer Science from Stanford University.
Image Source: Credit Karma, LinkedIn
Source: Credit Karma, Frost & Sullivan 9ABC-63
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Conclusion
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Conclusion Credit Karma offers many best practices that traditional players can learn and implement.
Absolute Customer Trust – Credit Karma’s key strength is the strong trust relationship with customers. The company strives to gain customer confidence in the early stage of the business by providing absolutely free services to consumers and it makes profit by charging referral fees from product providers. Traditional players can look to implement similar practices to strengthen customer relationship. Technology Enhancement – Credit Karma’s user base has been growing at a very fast pace and this leads to technology challenges. The Company shapes the technologies they use around their business needs and is . constantly striving to improve the data processing system. Traditional financial institution have to lift their technology play in order to avoid companies such as Credit Karma stripping off a part of their revenue. Simplified Financial Decision-Making – Traditional financial institutions’ application procedure is cumbersome and inefficient. Credit Karma makes the application process much easier by breaching the gap and fastening up applications. Credit Karma’s tailored recommendations also increases likelihood of approval (that is, mortgage loan and credit card). Traditional players should look into simplifying and automating the application process as well as offering simple financial products which are easier to apprehend.
01 02
03 Source: Frost & Sullivan
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Legal Disclaimer Frost & Sullivan is not responsible for any incorrect information supplied to us by manufacturers or users. Quantitative market information is based primarily on interviews and therefore is subject to fluctuation. Frost & Sullivan research services are limited publications containing valuable market information provided to a select group of customers. Our customers acknowledge, when ordering or downloading, that Frost & Sullivan research services are for customers’ internal use and not for general publication or disclosure to third parties. No part of this research service may be given, lent, resold or disclosed to noncustomers without written permission. Furthermore, no part may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the permission of the publisher.
For information regarding permission, write to: Frost & Sullivan 3211 Scott Blvd., Suite 203 Santa Clara, CA 95054 © 2018 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan. 9ABC-63
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Appendix
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List of Exhibits Exhibit
Slide Number
Credit Karma Profile: User Base, US, 2011–2017
11
Credit Karma Profile: Revenue, US, 2014–2016
11
Credit Karma Profile: Total Investment Received, US, November 2009–June 2015
12
Credit Karma Profile: Impact Analysis, US, 2017
23
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The Frost & Sullivan Story The Journey to Visionary Innovation
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The Frost & Sullivan Story
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Value Proposition—Future of Your Company & Career Our 4 Services Drive Each Level of Relative Client Value
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Global Perspective 40+ Offices Monitoring for Opportunities and Challenges
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Industry Convergence Comprehensive Industry Coverage Sparks Innovation Opportunities
Automotive & Transportation
Aerospace & Defense
Measurement & Instrumentation
Consumer Technologies
Information & Communication Technologies
Automotive Transportation & Logistics
Energy & Power Systems
Environment & Building Technologies
Healthcare
Minerals & Mining
Chemicals, Materials & Food
Electronics & Security
Industrial Automation & Process Control
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360º Research Perspective Integration of 7 Research Methodologies Provides Visionary Perspective
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Implementation Excellence Leveraging Career Best Practices to Maximize Impact
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Our Blue Ocean Strategy Collaboration, Research and Vision Sparks Innovation
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9ABC-63 July 2018
Contents Section Executive Summary
Slide Number 4
Executive Summary
5
Snapshot
6
Business Overview
7
Business Overview
8
Solutions Offered
10
Business Performance
11
Investment Received
12
Strategic Imperatives
13
Business and Disruption Model
18
Credit Karma’s Business Model
Challenges
Challenges Faced by Credit Karma
Impact Analysis
Impact on Financial Services Industry
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2
Contents (continued) Section Credit Karma’s Team
Credit Karma’s Key Personnel
Conclusion
Conclusion
Appendix
List of Exhibits
The Frost & Sullivan Story
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Slide Number 24 25 27 28 30 31 32
3
Executive Summary
Return to contents 9ABC-63
4
Executive Summary
Credit Karma?
• Credit Karma is the firstever platform that provides consumers with truly free credit report, credit scores and credit monitoring without any hidden costs and obligations. • The company leverages the credit data collected from members in order to provide highly personalized recommendations to its members and matching them with suitable financial products. • The company has a user base of 75 million as of December 2017.
Does it complement, extend or disrupt the market?
• The company is disrupting the traditional consumer credit reporting and monitoring market which was once full of hidden fees and opaque fine prints. • With the launch of its free tax e-filing service, the company is also disrupting the tax preparation industry. • However, it complements the financial services industry by matching the right financial products with the right consumers who are more likely to be approved.
What is Credit Karma’s impact on Financial services industry?
• Credit Karma is likely to have low to medium impact in more than $13.15 trillion market in the United States, that includes: o Household debt market of $13.15 trillion o Tax preparation market of $8.9 billion • Credit Karma is changing the traditional mode of acquiring financial products. Instead of purchasing directly from financial institutions, it attracts customers to purchase products through its platform.
What can traditional players do to avoid disruption?
Banks can look to: • Attract consumers by providing complementary services. • Use data analytics to collect and process members’ data in order to match them with more suitable products which suit their needs. • Offer simple and transparent products which are simple to understand and apply. • Automate and simplify the application process for its financial products.
Source: Frost & Sullivan 9ABC-63
5
Snapshot
$500 million+
More than
75 million
revenue in 2016 and has grown 50% compared to previous year
members1
700+ Number of Full-time Equivalent Employees2
Headquarter San Francisco, the United States
Founded since
$367.5 million
2007
Investment received till date1
3
Focuses on providing main recommendations
All services provided are
Credit cards
for all consumers
Loans Auto 1. As of Dec 2017 9ABC-63
2. As of June 2017 3. As of June 2015
Free Valued at
$3.5 billion
3
Source: Credit Karma, Frost & Sullivan 6
Business Overview
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7
Business Overview Credit Karma was founded to help people better understand their finances and to offer access to more suitable and better financial products.
Fintech company at a glance
Key Financials and Other Data as on December 2017
Company Name
Credit Karma
Revenue
$500 million in FY 2016
Headquarters
San Francisco, the United States
Number of Members
75 million
Company Type
Private
Employees
700+
Industry Subsector and Sector
Personal Financial Services
Total Investment Received
$367.5 million
Website
www.creditkarma.com
Key Competitors
NerdWallet, Credit Sesame, Credit.com, Lending Tree
Credit Karma’s Key Milestones
In March 2008, started offering free credit scores. In November 2010, Credit Karma hits 1 million members. In December 2016, launched Credit Karma Tax.
Founded on March 2007 by Kenneth Lin, Ryan Graciano and Nichole Mustard.
Strategic Imperatives
In November 2009, received first investment of $2.5 million.
2
In 2015, Credit Karma began its “My Money Story” campaign. In December 2017, Credit Karma hits 75 million members.
Diversify Complementary Product Offerings
1
3
Business Expansion
Increase Brand Awareness
Source: Credit Karma, Frost & Sullivan 9ABC-63
8
Business Overview (continued) Credit Karma offers free services that consumer can benefit without paying anything. Additionally, it offers the following free benefits: Free access to credit reports anytime from TransUnion and Equifax, with weekly updates. You can dispute any credit report errors or discrepancies directly through a simple online process.
Credit Report Direct Dispute
Credit Score
Provides free credit scores from TransUnion and Equifax.
Credit Score Factors
Grades on each of the factors that impact your credit score (that is, credit card utilization, payment history).
Credit Monitoring
Alerts you on any important changes on your TransUnion or Equifax credit reports.
Credit Score Simulator
An educational tool which shows you how your financial actions (that is, new credit card) might impact your score.
Unclaimed Money
Credit Karma helps you to discover if you have unclaimed money for free.
Free Tax Filing
Offers completely free e-filling of your federal and state taxes. Credit Karma’s Team
Key Markets Disrupted The company sets to disrupt and re-engineer the billion-dollar consumer credit reporting and monitoring market. The company also steers up the tax preparation industry by offering free tax filing service without any income limits. Image Source: Credit Karma, LinkedIn 9ABC-63
Kenneth Lin
Ryan Graciano
Chief Executive Officer Founder
Chief Technology Officer Co-Founder Source: Credit Karma, Frost & Sullivan 9
Solutions Offered Credit Karma tailors financial product recommendations and targets its advertisements based on each user’s credit profile and user data available with it. Personalized Recommendations
Accounts
Collections
Public Records
Tax Filing
• Robust Analysis • Algorithms
Credit Cards
A variety of credit cards to cater different needs (that is, balance transfer, low interest, cash back, student)
Loans
Personal Loan, Home Loan, Auto Loan, Business Loan, Student Loan
Auto
Auto Insurance, Auto New Loan, Auto Refinancing
Credit Inquiries
Help members to save money “Our goal is to be the best product in the whole spectrum of financial-services products that consumers could use help on.” - Kenneth Lin, Founder and CEO, Credit Karma Source: Credit Karma, Frost & Sullivan 9ABC-63
10
Business Performance Credit Karma has more than 75 million members as of December 2017.
Credit Karma Profile: User Base, US, 2011–2017
70
75
175.0%
60
75.0%
30
80
81.8%
42.9%
0
35
20
11
20 10
120
60
40
50
50
160
25.0% 40 20.0% 0
2011 2012 2013 2014 2015 2016 2017 User Base
Year-on-year Growth
Credit Karma Profile: Revenue, US, 2014–2016 Revenue ($ Million)
600 500 500 400
350
300 200
200 100 0 2014
2015
2016
Year-on-year Growth (%)
200
4
User Base (Million)
80
• Credit Karma’s user base has grown aggressively since launching its free credit scores in 2008, growing at a compound annual growth rate (CAGR) of 63.0% from 2011 to 2017. • In 2012, Credit Karma’s user base grew the most, at a rate of 175%, after the launching of its free daily credit monitoring and its first mobile app on iOS.
• As of December 2017, Credit Karma has gathered over 75 million members, serving more than one-third of all the United States millennials and nearly one-third of all Americans with credit reports. • The company claims that it has been profitable for the past 2 years (2015 and 2016) and reported revenue of more than $500 million in 2016 - an increase of about 50% from last year. • Credit Karma’s valuation increased from $1.0 billion in September 2014 to $3.5 billion in June 2015. Source: Credit Karma, Frost & Sullivan
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Investment Received Credit Karma had received a total investment of $367.5 million till December 2017.
Credit Karma Profile: Total Investment Received, US, November 2009–June 2015
Nov 2009
(Series B)
(Series C)
Investment: $30.0 Million Investor: Ribbit Capital, Felicis Ventures, Susquehanna Growth Equity
Investment: $75.0 Million Investors: Google Capital, Tiger Global Management, Susquehanna Growth Equity
Apr 2013
Mar 2014
Sept 2014
June 2015
(Series A)
(Series C)
(Series D)
Investment: $2.5 Million Investors: QED Investors, SV Angel, Founders Fund (FF Angel), FF Angel, Aydin Senkut, Felicis Ventures
Investment: $85.0 Million Investors: Ribbit Capital, Google Capital, Tiger Global Management, Susquehanna Growth Equity
Investment: $175.0 Million Investors: Valinor Management, Tiger Global Management, Viking Global Investors LP
Source: Credit Karma, Frost & Sullivan 9ABC-63
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Strategic Imperatives
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Strategic Overview Credit Karma has continuously added new products and strengthen client relationship to grow at rapid pace.
Mission
Strategic Imperatives
Creating a platform to help consumers improve their financial health and serve as a one-stop shop for financial products. It aspires to become the “Amazon of personal finance”.
Bringing transparency to consumer finance and gain trust of consumers by offering diversified complementary service offerings.
“We have a mission at Credit Karma to make every consumer their best financial self. So however you define what your best financial self is, we want to create those tools and give you the functionality to improve whatever situation you aspire to. – Kenneth Lin, CEO and Founder of Credit Karma, Apr 2016.
Business Expansion
Increase Brand Awareness
Diversify Complementary Product Offerings
Source: Credit Karma, Frost & Sullivan 9ABC-63
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Strategic Overview (continued) Complementary product offerings has been one of the key attributes to signing up new members.
Diversify Complementary Product Offerings The company wants to go beyond offering credit score and has set its mission to be a digital financial assistant. Thus, Credit Karma continues to add new free features and products in order to capture larger user base.
March 2008
Free Credit Score
Offers free credit scores to consumers.
January 2012
Free Daily Credit Monitoring
Credit Karma launches its free daily credit monitoring and its first mobile app on iOS.
July 2014
Free Full Credit Report
Partners with additional credit bureau and provides full credit reports and credit scores from two of the three major credit bureaus in the United States for free.
December 2016
Free Tax Preparation & Filing
With the acquisition of AFJC Corporation (a provider of online tax preparation), it launched Credit Karma Tax which provides free federal and state tax preparation, along with free e-filing. Approximately, three million people have started using Credit Karma Tax (as of Jan 2018).
May 2017
Credit Karma Unclaimed Money
Provides free service for members to search for unclaimed money that belongs to them. It streamlines the process by combing through state databases for members. Source: Credit Karma, Frost & Sullivan
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Strategic Overview (continued) Business Expansion
November 2016
Credit Karma took a step further to grow its business by expanding into new geographies in order to gain access to fresh market and additional pool of customers.
1
Credit Karma expands to Los Angeles, opening its first office outside of its San Francisco headquarters. It also hires additional staff who are mostly software engineers.
2
Credit Karma increased its footprint by expanding into Canada. Its services will be available in the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island and Saskatchewan. Credit Karma becomes one of the largest providers of free online credit scores and credit reports in Canada. As of September 2017, Credit Karma has almost one million members in Canada.
December 2016
Entered in Charlotte, North Carolina in its efforts to establish a long-term presence on the East Coast. The Charlotte office focuses on Credit Karma’s free online tax preparation service.
May 2017
After operating out of co-working space for 6 months in Charlotte, Credit Karma officially moved into its new first East Coast office in Ballantye which has a Star Wars theme.
“Since our founding nine years ago, many Canadians have asked for Credit Karma, which made selecting Canada as our first market outside of the U.S. a natural decision” - Kenneth Lin, CEO & Founder, Credit Karma Source: Credit Karma, Frost & Sullivan 9ABC-63
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Strategic Overview (continued) Increase Brand Awareness
Credit Karma advertises through multiple mediums, including billboard, television advertising and digital marketing. This marketing strategy has helped the company to increase its brand awareness in short time and to attract more users to its platform.
Nationally-aired television commercials
Credit Karma is well-known for its quirky commercials. It has nationally aired hundreds of TV commercials, mostly produced in-house, featuring Credit Karma employees. Its very first TV commercial was aired nationally in December 2011, broadcasting that Credit Karma is a truly free credit scores provider.
In January 2018, Credit Karma secured a 45 seconds Super Bowl Spot to air its commercial about Credit Karma Tax. As Super Bowl is often the most watched television broadcasts in the United States, this will help Credit Karma to reach out to more users.
#MyMoneyStory Campaign In 2015, Credit Karma launched its “My Money Story” campaign which encourages people to share their financial journeys, hoping that this will raise people’s financial awareness and break the taboo of discussing financial matters. As part of the campaign, Credit Karma produced a number of videos which feature individuals sharing about their personal financial experiences. These videos are accessible on Youtube and has changed people’s shyness toward discussing about money and debts. Source: Credit Karma, Frost & Sullivan 9ABC-63
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Business and Disruption Model
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Credit Karma’s Business Model Key Takeaway: Credit Karma offers free service to its consumers. However, it makes money from partners by charging a fee for advertising their products to the consumers. How Does Credit Karma Earn Money? Free Credit Scores , Reports and Tools
Personalized Recommendations
Get Paid by Partner Companies
Free access to credit scores and credit reports along with other free financial services in the platform.
Analyses members’ credit profile to offer personalized product recommendations.
Credit Karma gets paid by banks or lenders if members get a product through the recommendations.
• Offers free insights to attract audience. • Collects members’ financial information. • By offering free tax filing, Credit Karma can monitor users’ finances even better by collecting more credit information of the user.
• Recommendations are made based on powerful algorithms and robust analysis. • This is done by implementing real-time Big Data analytics. • Better match of consumers to the right services from the right financial advertisers.
• This is Credit Karma’s “win-win-win” business model. • When there is a successful match, Credit Karma makes money, members save money and the bank gets a new customer.
Source: Credit Karma, Frost & Sullivan 9ABC-63
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Challenges
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Challenges Faced by Credit Karma Key Takeaway: Increased Competition and Law Suits Filing Against it are the key challenges faced by Credit Karma.
Increased Competition • Credit Karma’s business model is simple, resulting in the up rise of many players with similar business model. Many players in the credit reporting industry offer free credit reports, scores and credit monitoring. Even Experian, a credit bureau, is offering free credit reports. • Credit Karma faces direct competition from Credit Sesame, Nerdwallet and Credit.com. They have very similar business model, if not the same, as that of Credit Karma. • Additionally, Credit Karma is facing indirect competition from platform like Lending Tree, one of the leading online loan marketplace which also offers free credit score alongside with their service.
Law Suits • Credit Karma was sued by the Federal Trade Commission (FTC) for misrepresenting the security of its mobile apps and its failure to secure the transmission of consumers’ sensitive personal information from its mobile apps. • The FTC alleged that Credit Karma left consumers’ sensitive personal information at risk by failing to take reasonable steps to secure their mobile apps.
• It was alleged that Credit Karma failed to implement an important encryption process, known as Secure Sockets Layer (SSL) certificate validation which verifies secure apps’ communications, making the application vulnerable to attacks. • Credit Karma reached a settlement with the FTC on these charges in August 2014. Source: Credit Karma, Frost & Sullivan
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Impact Analysis
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Impact on Financial Services Industry Credit Karma is likely to impact more than $13.15 trillion market.
Credit Karma Profile: Impact Analysis, US, 2017 Credit Karma’s Products
Free Credit Report, Credit Score and Credit Monitoring
Free Tax Preparation and Filing
Potential market that Credit Karma can impact
$13.15 trillion (CY 2017)
$8.9 billion (CY 2016)
Magnitude Strength of Impact1 of Impact2 Impact Analysis
LowMedium
LowMedium
High
• Credit Karma is the first company that offers truly free credit score, credit report and credit monitoring, winning trust from millions consumers. • This pro-consumer approach and the offer of complementary services disrupts the credit reporting industry which was once rife with hidden fees and opaque fine prints. • Credit Karma leverages data collected from its broad user base to recommend the right products that suit each member’s needs and credit worthiness. • It targets the trillion dollars US household debt market, capturing a portion of the major revenue streams from financial services.
High
• Credit Karma stormed the $8.9 billion tax preparation industry by launching its very own free tax filing service. • Due to Credit Karma’s built-in brand loyalty and trust with customers, this tax product is proved to be popular. • In the last tax season (April 2017), 1 million tax returns were filed through Credit Karma Tax and this has increased to 3 million people in the current tax season (January 2018).
Note: 1. Magnitude of impact refers to portion of market that can be impacted. For example, Credit Karma is targeting the millennials population, then it can only impact that segment and hence qualitatively its magnitude of impact is assessed at low to medium. 2. Strength of Impact is Frost’s assessment of company’s ability to grab customers in the segment. For example, Credit Karma’s pro-consumer approach and attractive “win-win-win” business model has higher chance of securing customers than traditional player and hence it is assessed as high.
Source: Credit Karma, Frost & Sullivan
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Credit Karma’s Team
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Credit Karma’s Key Personnel Name
Kenneth Lin
Ryan Graciano
Position
Description
Chief Executive Officer & Founder
• Ken spent his early career working with Upromise and Eloan.
Chief Technology Officer & Co-Founder
• Ken also founded Multilytics Marketing in 2006. • He holds a B.A. degree in Mathematics and Economics from Boston University.
• Ryan grew Credit Karma’s engineering department from a one-man band into a team of hundreds, developing a technical framework to support the company’s rapid growth. • Before joining Credit Karma, Ryan held a position in IBM for 5 years. • He holds a Bachelors degree in Computer Science from the Georgia Institute of Technology. • Responsible for the company’s financial planning, forecasting, record keeping and risk.
Joseph Kauffman
Chief Financial Officer
• Prior to joining Credit Karma, Joseph served as a Chief Financial Officer for TAL Education Group for 4 years and has also worked in New Oriental Education & Technology Group and the Coca-Cola Company. • He holds an MBA in Strategy, Finance and Accounting from Harvard University.
Image Source: Credit Karma, LinkedIn
Source: Credit Karma, Frost & Sullivan 9ABC-63
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Credit Karma’s Key Personnel (continued) Name
Nichole Mustard
Position
Chief Revenue Officer
Chief Marking Officer
Description
• Nichole oversees Credit Karma’s business development team in finding the right mix of financial partners and optimizing data science and business intelligence capabilities. • Prior to joining Credit Karma, Nichole spent 5 years as a Financial Service Sales Director at Compete, growing the company’s national profile.
• Greg oversees Credit Karma’s marketing department, making sure that the marketing, communications, consumer analytics and brand teams are in line with the company’s value.
• He was previously VP of Marketing Operations at Multilytics Marketing. • He graduated from University of Nevada-Las Vegas with a Master Degree in Electrical Engineering.
Geg Lull
• Nikhyl oversees product development and innovation in the company.
Nikhyl Singhal
Chief Product Officer
• He held several senior product roles for 4 years at Google. • Nikhyl was the CEO and co-founder for SayNow and Cast Iron Systems. He was also the co-founder and Director of Engineering. • He holds a B.S. as well as M.S. in Computer Science from Stanford University.
Image Source: Credit Karma, LinkedIn
Source: Credit Karma, Frost & Sullivan 9ABC-63
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Conclusion
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Conclusion Credit Karma offers many best practices that traditional players can learn and implement.
Absolute Customer Trust – Credit Karma’s key strength is the strong trust relationship with customers. The company strives to gain customer confidence in the early stage of the business by providing absolutely free services to consumers and it makes profit by charging referral fees from product providers. Traditional players can look to implement similar practices to strengthen customer relationship. Technology Enhancement – Credit Karma’s user base has been growing at a very fast pace and this leads to technology challenges. The Company shapes the technologies they use around their business needs and is . constantly striving to improve the data processing system. Traditional financial institution have to lift their technology play in order to avoid companies such as Credit Karma stripping off a part of their revenue. Simplified Financial Decision-Making – Traditional financial institutions’ application procedure is cumbersome and inefficient. Credit Karma makes the application process much easier by breaching the gap and fastening up applications. Credit Karma’s tailored recommendations also increases likelihood of approval (that is, mortgage loan and credit card). Traditional players should look into simplifying and automating the application process as well as offering simple financial products which are easier to apprehend.
01 02
03 Source: Frost & Sullivan
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Legal Disclaimer Frost & Sullivan is not responsible for any incorrect information supplied to us by manufacturers or users. Quantitative market information is based primarily on interviews and therefore is subject to fluctuation. Frost & Sullivan research services are limited publications containing valuable market information provided to a select group of customers. Our customers acknowledge, when ordering or downloading, that Frost & Sullivan research services are for customers’ internal use and not for general publication or disclosure to third parties. No part of this research service may be given, lent, resold or disclosed to noncustomers without written permission. Furthermore, no part may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the permission of the publisher.
For information regarding permission, write to: Frost & Sullivan 3211 Scott Blvd., Suite 203 Santa Clara, CA 95054 © 2018 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan. 9ABC-63
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Appendix
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List of Exhibits Exhibit
Slide Number
Credit Karma Profile: User Base, US, 2011–2017
11
Credit Karma Profile: Revenue, US, 2014–2016
11
Credit Karma Profile: Total Investment Received, US, November 2009–June 2015
12
Credit Karma Profile: Impact Analysis, US, 2017
23
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The Frost & Sullivan Story The Journey to Visionary Innovation
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The Frost & Sullivan Story
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Value Proposition—Future of Your Company & Career Our 4 Services Drive Each Level of Relative Client Value
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Global Perspective 40+ Offices Monitoring for Opportunities and Challenges
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Industry Convergence Comprehensive Industry Coverage Sparks Innovation Opportunities
Automotive & Transportation
Aerospace & Defense
Measurement & Instrumentation
Consumer Technologies
Information & Communication Technologies
Automotive Transportation & Logistics
Energy & Power Systems
Environment & Building Technologies
Healthcare
Minerals & Mining
Chemicals, Materials & Food
Electronics & Security
Industrial Automation & Process Control
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360º Research Perspective Integration of 7 Research Methodologies Provides Visionary Perspective
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Implementation Excellence Leveraging Career Best Practices to Maximize Impact
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Our Blue Ocean Strategy Collaboration, Research and Vision Sparks Innovation
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