May 16, 2020

Credit Karma: a truly inclusive financial management platform

Credit Karma
Equifax
Amber Donovan-Stevens
2 min
Credit Karma is the credit and financial management platform that has altered the way in which users approach credit.

By giving its users direct access...

Credit Karma is the credit and financial management platform that has altered the way in which users approach credit. 

By giving its users direct access to credit scores, Credit Karma is dispelling the myths of credit and returning control of finance to individuals. The platform, which is little over a decade old, now has over 100mn and is forecasted by Business Insider to be the next IPO of 2020.

Credit Karma was founded on March 8, 2007, by Kenneth Lin, Ryan Graciano and Nichole Mustard. Leading with the motto: “everyone deserves to feel confident about their finances,” the company allows users to track their credit score by offering a comprehensive credit score and financial management platform. The service offers free credit scores and reports from national credit bureaus TransUnion and Equifax. Headquartered in San Francisco, CA, US, the fintech now has a market valuation of US$4bn, which is set to continue to grow in 2020 as the company prepares to develop services. 

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Perhaps most importantly, the services offered by the Credit Karma are free, truly living up to its ethos. The company instead makes its money through targeted ads that feature on the platform. To continue in its campaign of building financial confidence in its users, in 2015 it launched a campaign called “My Money Story” which sought to encourage individuals to discuss their money experiences, which is a topic often socially considered taboo. From this, the company created several short videos which have since inspired a more open conversation around finances and in particular, credit. 

Click right of our banner image to see one of the videos from "My Money Story."

Did you know? Credit Karma also provides a Credit Score Simulator, which offers an estimated alteration to a credit score based on a theoretical purchase. 

For more information on all topics for FinTech, please take a look at the latest edition of FinTech magazine.

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Jul 23, 2021

Robinhood faces $35mn fine from New York DFS

Robinhood
IPO
Nasdaq
gamestop
2 min
Robinhood faces $35mn fine from New York DFS
Robinhood announced it had reached a ‘settlement’ with regulators and is on target for a $35bn valuation for its initial public offering

The renegade trading platform, Robinhood, which was central to the GameStop shares frenzy earlier this year, faces a US$35mn fine from New York financial regulators.

The company’s crypto division was issued with a wrist slap in 2020, following the red flagging of several “matters requiring attention”. Robinhood revealed it had reached a settlement with the New York State Department of Financial Services regarding the issues, which related to “alleged violations” of cybersecurity and anti-money laundering rules.

Robinhood valuation

The news follows on from the announcement earlier this week that the trading platform favoured by armchair investors, which almost broke Wall Street earlier this year, has an expected valuation of $35bn following its IPO.

Critics of the platform say Robinhood encourages “risky behaviour” among inexperienced (armchair) investors. The app has also been criticised for not informing customers that much of its profits are generated by routing their trades to Wall Street firms taking the other side, or so-called "payment for order flow."

Robinhood said last month they expected the DFS fine to be at the $15mn mark, adding it would be “the bottom of the range for our probable loss in this matter”. The $35mn penalty is on top of the record $70mn Robinhood incurred from US financial regulator FINRA in June, for “lax vetting and outages.”

However, the settlement indicates the company’s IPO will go ahead as planned, despite initial concerns the investigation could see the float delayed until later this year.

Robinhood floats imminent

Despite the regulatory hiccups, Robinhood priced its IPO between US$38-US$42 per share, giving the platform the US$35bn valuation and analysts predict the firm’s debut on the Nasdaq could occur as early as next week.

Reports suggest that 55 million shares will be offered. Robinhood founders, Baiju Bhatt and Vlad Tenev are also set to sell 2.63 million shares.

Robinhood democratising investment

Launched in 2013 by Tenev and Bhatt, who were Stanford University roommates, Robinhood’s founders will retain most of the voting rights after the IPO. Bhatt reportedly holds 39% of the voting power of outstanding stock, while Tenev holds 26.2%.

The online brokerage, which came under fire for its handling of the GameStop trading debacle, which saw the platform limit stocks to investors, states its mission is to “democratise” investing and is one of the most highly anticipated IPOs of the year.

Robinhood was valued at $11.7bn in autumn 2020 following a private equity funding drive. The new valuation will mean represent a three-fold increase in the company’s market value in less than 12 months.

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