Credit Karma

Multi-sided Model






Credit Karma is an online personal finance platform where, in exchange for entering personal information, individuals can access and monitor their credit report/scores for free. These scores are already available on the web for a fee and are not produced by Credit Karma. The site also offers tools and suggestions on how to improve these scores.

Credit scores are a number that indicates an individual’s credit worthiness. In the US these scores are produced and owned by credit bureaus and can be accessed for a fee. There are three nationwide credit bureaus in the US: Experian, Equifax and TransUnion. Credit Karma offers free access to scores from Equifax and TransUnion.

The Credit Karma is able to 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 individuals 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 with the aim of making 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. The business has a valuation of $3.5billion and over 60 million users.

CUSTOMERS – WHO THEY ARE:

Credit Karma’s two primary customer groups are: consumers looking to discover their credit score and credit/loan providers looking to sell these consumers products. In additional to this is a customer group of individuals looking for financial help and information while not searching for their credit score.

ENGAGEMENT – VALUE CREATION PROPOSITION:

Credit Karma creates value for these two main groups in different ways:

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 utilising the site for advertising. Credit Karma does however, tailor the adverts shown to match the searchers credit profile. These tailored adverts create value for consumers as they can apply for loans or credit with a higher probability of being approved. 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.

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:

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

MONETIZATION – VALUE CAPTURE:

Credit Karma does not publish detailed information about its revenue but Credit Karma’s Communications Director Christina Ra has stated the company has revenue in the “hundreds of millions of dollars” range and that it is “profitable”. Credit Karma does not share, sell or rent individuals’ information.

Sources:

http://www.investopedia.com/articles/personal-fina...

https://www.creditkarma.com/

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

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

https://www.creditkarma.com/pressreleases

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

Disclaimer:

Written by Thomas Murray under the direction of Prof Charles Baden-Fuller, Cass Business School, in September 2016. 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. © 2016




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