Credit Karma

Multi-sided Model






Credit Karma is a fintech business using a multi-sided model to connect companies and customers through an online platform where, in exchange for entering personal information, individuals can access and monitor their credit report/scores for free. The company’s core business is not a solution model since customer groups use Credit Karma as the intermediary for their transactions.

Credit Karma offers access to these scores for free by using tailored product ads for loans and credit cards based on an individual’s credit profile as their source of revenue. The adverts displayed have additional value for consumers as only products that match an individual’s credit profile are displayed. These products are sorted and highlighted based on the probability of a customer’s application being approved.

Credit Karma provides this service through tailored recommendations and via a search and comparison engine for credit cards and loans. Companies pay Credit Karma to promote their products on this engine, with Credit Karma also taking commission for lead generation. Credit Karma states it does not sell, rent or share information of its users.

Businesses showcasing their products on Credit Karma’s search and comparison engine creates additional value for consumers looking to discover their credit score, as these customers may then assess credit products that have been pre-selected to fit their credit profile. Consumers access this additional value through the search and comparison engine provided by Credit Karma or through the recommendations section of their profile. This indicates that for customers who enter data Credit Karma operates a triadic multi-sided business model.

In addition to the core business model Credit Karma offers its users a portfolio of supporting services including tracking of credit card, loan transactions and balances; forums for financial product reviews and credit advice; calculator tools for debt repayment, home affordability and simple loans.

HISTORY

Kenneth Lin founded credit Karma in June 2007 to make credit reports easier to access and more transparent. The company now employs over 250 staff and is based in San Francisco. It secured Series A funding of $2.5 million in November 2009 and has raised $368.5 million in financing overall. In 2015, Credit Karma join the unicorn club (i.e. startup companies that had succeeded in growing and attracting international investments–worth $1 billion or more). At its most recent funding round in 2018, Credit karma was valued at $4 billion and has 85 million members in the US and Canada as of 2019 (Google Capital is an investor).

CUSTOMERS – WHO THEY ARE:

Credit Karma has two main customer groups: consumers looking to discover their credit score and companies (i.e. credit/loan providers) looking to sell these consumers products. Also, there is a third customer group consisting of individuals looking for financial help and information while not searching for their credit score.

ENGAGEMENT – VALUE CREATION PROPOSITION:

Credit karma creates value for each customer group in different ways.

How Credit Karma creates value for consumers:

Credit Karma provides access to an individual’s own credit score free of charge. The site also provides advice and offers a search and comparison engine to enable consumers to find loans and credit cards products that match their credit profile. These products are not provided by Credit Karma and are from the companies utilizing the site for advertising.

Credit Karma does, however, tailor the adverts shown to match the searchers credit profile. The ability to search by likelihood of approval is not available to customers who do not sign up for the Credit Karma service, but this group of customers can still compare credit cards and access advice.

How Credit Karma creates value for companies:

Companies draw value from access to Credit Karma’s 60 million users and its ability to use data to target their credit/loan products at consumers who are likely to be approved or who fit the risk profile of the company.

DELIVERY – THE VALUE CHAIN:

How Credit Karma works for consumers:

The service is accessed via website or a mobile device application. Individuals must create a profile and enter personal information to access their scores and recommendations. Unlike other sites that offer reports a customer does not have to register with a credit card. This means that it is easier to join for those that may not own a credit card. Once a customer signs up, they can track their credit rating whenever they choose. The credit is produced by another company independent of Credit Karma.

Consumers can search advice and compare products without a profile, but these results will not be tailored to an individual’s credit worthiness and they will be unable to access their credit score or report.

How Credit Karma works for companies:

Companies looking to showcase their products on the site must contact the firm via email.

MONETIZATION – VALUE CAPTURE:

Credit Karma makes money mostly by charging fee for companies to promote their product on this engine. Credit karma states it does not sell, rent or share information of its users and it is unclear how profitable credit Karma is as it does not publish detailed financial figures. However, according to one article “In 2017, the company saw revenues grow 37% to $682 million…reports reveal that the company has been profitable since 2015”. Also, the company “has raised $868 million in funding so far from investing including Silver Lake Partners, Google Capital, Tiger Global Management”.

CREDIT KARMA DIGITAL TECHNOLOGY:

Credit karma uses data to build trust with customers through a chatbot that will increase customer engagement and provide an additional source of data for its product-recommendation engine. Through the collection of ‘taxpayers’ income and other details entered in the tax filing process, Credit Karma Tax sought to recommend credit cards and financial products. Also, Credit Karma leverages technology to launch free ID monitoring to alert its customers as soon as possible if they have been affected by a data breach or if there was suspicious activity on their accounts.

Sources:

https://www.creditkarma.com/

https://www.creditkarma.com/about/partners

https://www.crunchbase.com/organization/credit-karma

https://www.creditkarma.com/pressreleases

http://fortune.com/2015/06/23/credit-karma-loans-f...

Disclaimer:

Written by Thomas Murray under the direction of Prof Charles Baden-Fuller, Cass Business School in 2016. Revised and updated by Francesca Hueller under the direction of Prof Charles Baden-Fuller, in 2019. This case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. The information contained here should not be used for investment advice and is simply indicates the individual’s understanding of the company’s business models as of November 2019. © 2019



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