In February, Intuit announced plans to buy Credit Karma, Lending Club said it would acquire Radius Bank, and Ally Financial published plans to acquire CardWorks. Also, Visa took a stake in ChargeAfter, a month after releasing plans to buy Plaid.
It has been a busy few weeks for consumer financial services dealmakers, and there’s a good chance that the activity will continue. Taken together, the transactions illustrate some key transformational signs about today’s consumer financial services industry, and they offer some hints about what might come next.
These deals are consistent with three themes that are becoming particularly prominent in consumer financial services:
And while these aren’t necessarily new, there are now conditions in place that make them more powerful. Let’s look at each of these in turn.
1. The data battle is heating up
Intuit knows a lot about its customers’ tax and spending activity. Credit Karma, in contrast, has data that helps predict how consumers might behave in the future. Visa’s acquisition of Plaid, another data aggregator, follows a similar path. Plaid, an infrastructure provider, helps FinTech companies connect to thousands of banks—with consumers’ explicit permission. Even a more conventional acquisition like Ally’s can be seen as a data play; CardWorks (and its Merrick Bank subsidiary) is known for data-driven marketing to subprime consumers. Along with “is it accretive?,” firms seem to be asking “will it make us smarter about what our customers want?”
2. Context is everything
How does a lender get to be “top of wallet”—the first name that a buyer turns to? It takes more than brand awareness. Lenders need to know when the buyer will be ready to act, and present their offer in the context of that decision. With the right data, and the right analytic tools, financial firms could finally be in a position to predict when a customer will press the “buy” button. But it’s not just Credit Karma and Plaid thinking about this. ChargeAfter, a point-of-sale financing platform, aims to give consumers a range of financing options as they are making a purchase. If you know what consumers plan to do and when they’re ready, you can present an offer that will get their attention.
3. It’s all about the ecosystem
The lines that define industries continue to blur. When Apple announces a credit card (in cooperation with Goldman Sachs), or T-Mobile markets a checking account (in cooperation with Pennsylvania’s Customers Bancorp), it’s clear that consumers are thinking differently about how they choose their financial providers. Increasingly, providers are taking a team approach, using application programming interfaces (APIs), which allow applications to communicate with one another. This allows them to pull together the right infrastructure to give customers the services and experiences they want, when they want them. Often, the service providers are embedded ‘behind the scenes’ as with both of Visa’s moves. This is also the case with Lending Club’s play for Radius, which has built an admirable banking-as-a-service offering with a range of relationships. But the speed of these moves is also a reminder of what’s at stake: large tech firms have set their sights on consumer finance, and they’re moving quickly. Apple, Amazon,Google, and others are all building up capabilities by creating networks of partners.
We recognize that the reasons driving one transaction may be completely different from another, even when they look the same to outsiders. But we’re confident that financial services firms will continue to double down on data plays and efforts to extend their reach through clever networking. Similarly, we expect more announcements that will blur industry definitions in the quest to provide financial experiences for customers that are contextual, seamless, and “just work.”
Decades ago, some large firms talked about developing “financial supermarkets,” full-service offerings that could address any financial need at any life stage. But the tools weren’t perfect and the offerings were hardly customer-centric. Now, the technology is finally catching up to the vision. The current round of dealmaking shows that the range of potential matchups is broader than ever. Winners will anticipate what their customers really want, and they will put together the right combinations of internal and external resources to make offers that matter.
Asset and Wealth Management Deals Leader, PwC US
Principal, Consumer Finance Group, PwC US