Credit Karma, the US startup with 85 million users that offers credit reports and a platform to browse and buy other financial services, has made an acquisition to help it kick-start its first overseas expansion beyond the US and Canada: it has acquired Noddle, a UK-based credit reporting service with 4 million users, from TransUnion.
Financial terms of the deal are not being disclosed, but Valerie Wagoner, Credit Karma’s VP of International (who had previously been at Twitter), said that it will be a full acquisition of tech and employees — 35 in all — and TransUnion is not taking any stake in Credit Karma as part of this deal, although the two will continue to work together with TransUnion providing data to Credit Karma, as it had done before.
As a point of reference — and a sign of the consolidation and competition in the market — earlier this year Experian acquired another credit scoring service in the UK, ClearScore, for the equivalent of $385 million. That service has 6 million users compared to Noddle’s 4 million. Competition authorities are still investigating that deal, and Credit Karma’s will also have to get the pass from regulators before closing.
Credit Karma raised $500 million in a secondary round earlier this year that valued it at $4 billion, specifically to help fuel its growth, and that’s what it has been doing. (It also acquired mortgage platform Approved in August.)
For TransUnion, this is a cleaning of house, of sorts. The larger company, a credit reporting agency that competes against Equifax and Experian — and thus, in part, with Credit Karma, too — acquired CallCredit in the UK earlier this year for $1.4 billion; Noddle had been a part of CallCredit that overlapped with existing operations at the bigger company: hence the divestment.
“We are proud to have partnered with Credit Karma from its inception to empower tens of millions of consumers with the information they need to make smarter financial decisions,” said John Danaher, TransUnion’s president of Consumer Interactive, in a statement. “This deal represents an expansion of our mission to the United Kingdom, and we look forward to supporting Credit Karma as they continue to expand globally.”
In an interview, Wagoner said that the first thing that Credit Karma is doing is making Noddle’s previously paid services free to use from now on, to align it closer with Credit Karma’s business model of offering all credit scoring and monitoring services for free, and making money when a user purchases (not just clicks through to) other financial services on its site from partners. Previously, Noddle offered free credit scoring but charged for other services like ID monitoring (more on that below).
“We will make sure 100 percent of the business is free and accessible to everyone,” she said.
This will be the first step in integrating the two businesses and their customer bases, she said: the next will be to offer Credit Karma’s wider range of offerings — which cover services like automotive loans and mortgages, credit cards and refinancing offers — to Noddle’s users.
Although most of the integration will involve using Noddle’s existing base and established market presence in the UK to bring in Credit Karma products, there will be features of Noddle’s coming to Credit Karma as well.
The US startup launched a monitoring tool six months ago — in part a response to the many large data breaches that we have seen hit the Equifaxes of the world in recent times — and it will be expanding that to do more with identity monitoring.
This is an area where Noddle has been developing products, Wagoner said, and the plan longer term will be to use some of that development in Credit Karma’s wider business.
“We never want data breaches to happen but we know they are inevitable in this day and age,” she said, “not just at credit bureaus but all businesses, so it’s important for us to be able to deliver services to members that affect them and their credit around ID monitoring and services that help monitor breeches.”
She noted that Noddle’s ID monitoring product — which had been one of its paid products — today has relatively little usage.
For example, it partnered with TalkTalk in 2015 to provide ID monitoring to users after the carrier reported a data breach where TalkTalk would have paid for the monitoring deal to offer the service free to its customers.
But “it is a sign that Noddle cares about that mission and is a great fit for the Credit Karma family family.” No word on when that product will make its way to the Credit Karma service elsewhere, but that is on the roadmap she said.
It will be worth watching to see whether Credit Karma uses this acquisition as a template for how it will enter new markets, or whether it will look to organic expansion elsewhere. The company, we’d reported back in 2015, had been eyeing an IPO within two years. The company is profitable, and we’ve been seeing a strong market for public offerings from tech companies, although for now it looks like the company is focused on creating more diverse revenue streams before taking further steps.