The two companies announced that Personal Finance launched the SOFI plan to acquire Galileo Financial Technologies for a $ 1.2 billion cash plus stock transaction.
Galileo is an application programming interface (API) based payment platform that supports many challenger banks, including Chime and Varo. The company said annualized payments processed in March exceeded US $ 53 billion, up from US $ 26 billion in September.
SoFi CEO Anthony Noto said in a statement: "We will work with Galileo to use our company's strengths to promote greater financial technology innovation so that existing and future partners can use these products and services." Can enable a broader company ecosystem to work with us to help the world achieve financial independence. “In-
As part of the transaction, Galileo Utah will continue to be an independent subsidiary of Social Finance Corporation, while Galileo ’s CEO Clay Wilkes will continue to serve as CEO.
Wilkes said in a statement: "SoFi has established a very strong and diversified financial services company focused on a full range of financial services. These are the products that many of our leading fintech customers need." "Through us, enterprise-level API distribution products are the vision of this combination. I think it is very powerful."
The two companies already have a relationship. Last year, SoFi began using Galileo's payment platform for its cash management account SoFi Money.
Bryce Van Dieff, a consulting firm partner, said SoFi should be seen as a threat to traditional banks, not just industry players, because the deal provides startups with expanded technology, To support the direct B2B service and revenue model for consumers. Capco.
“Specifically, this acquisition will provide infrastructure services that support basic banking functions, such as account opening, capital, transfer, bill payment, etc. These functions can now support digital banking,” he said. It looks more like a traditional consumer bank, providing core services for banks, loans and payments. "
VanDiver said that banking infrastructure and API banking categories have increasingly become the focus of recent mergers and acquisitions in the fintech sector, citing Visa's plan to announce in January its plan to acquire data aggregator Plaid for $ 5.3 billion. VanDiver said that many people in the industry regard the service-centric model as the "next generation bank."
Financial technology consulting firm 11: FS's North American executive partner Sam Maule told Banking Dive that SoFi's plan to diversify its business under current market conditions is a "wise strategic move."
During the coronavirus pandemic, as more and more customers turned to digital channels, Noto stated that the timing of the deal with Galileo was just right.
Noto told CNBC: "From physical finance to digital finance, we are on a cliff." "It will serve people in this environment, and the demand for mobile financial services will only continue to grow."
But Maurer said the deal could trigger a potential conflict of interest around data, because many customers in Galileo's portfolio are SoFi competitors.
"What's fascinating is that it has benefited SoFi's service customers (such as Monzo, Robinhood, and Chime). I never thought about asking for it." Moore said.
Maurer said that if some of these companies consider relocation due to data problems, they may create opportunities for Marqeta, another Galileo competitor.
He said: "This is definitely a risk that SoFi considers when making an acquisition,"
The source told CNBC that the transaction included $ 75 million in cash, $ 250 million in seller-financed debt and $ 875 million in company stock.
SoFi's latest valuation is $ 4.8 billion, which was launched in 2011 and provides student loan refinancing. According to CNBC, the company has since expanded to include personal and mortgage loans, refinancing and wealth management, and stock and cryptocurrency trading.
In a few days last October, the failure of the Galileo platform caused Chime to shut down.
Galileo's other clients include fintech companies Revolut and TransferWise.