San Francisco fintech startup Social Finance, Inc. has snapped up Zenbanx Holding Ltd, a mobile savings account provider started by Canadian banker and entrepreneur Arkadi Kuhlmann, in a deal worth close to $100-million (U.S.)PAT CROWE II/The Associated Press
Deep-pocketed San Francisco fintech startup Social Finance, Inc. has snapped up Zenbanx Holding Ltd., a mobile savings account provider started by Canadian banker and entrepreneur Arkadi Kuhlmann, in a deal worth close to $100-million (U.S.)
Six-year old SoFi is buying four-year-old Zenbanx in an all-stock deal. Zenbanx had been struggling to raise fresh financing to fuel its growth providing multi-currency accounts online, typically to North American-based immigrants looking to transfer money overseas. The company is based in Delaware, where Mr. Kuhlmann previously built and ran branchless bank ING Direct USA after launching the original ING Direct concept (now called Tangerine) in Canada in the mid-1990s. Close to half of Zenbanx's 53 employees work in Toronto, and 60 per cent of its 40,000 customers are in Canada.
While Zenbanx managed to raise tens of millions of dollars from international investors, including WeChat parent Tencent Holdings Ltd. and DCM Ventures, Mr. Kuhlman said, "It's become a tough market in the last year or so … to raise money … If you look at number of deals, bank licences, things happening in fintech, there's a lot of activity but [there has] not been an awful lot of funding."
Funding hasn't been an issue for SoFi, led by co-founder and CEO Mike Cagney. The company has raised $1.4-billion in venture capital backing to date, including a $1-billion round in 2015 led by SoftBank. SoFi has said it's looking to raise another $500-million in the coming months.
SoFi targets upwardly mobile millennials, or "HENRYs" (short for high-earning, not rich yet), pitching itself as a friendlier, more socially conscious alternative for those who feel underserved by conventional financial institutions. It started by offering student loan refinancing, personal loans and mortgages, and recently expanded to offer wealth management and term life insurance. SoFi has 225,000 customers in the U.S., writing more than $15-billion in loans to date.
Now Mr. Kuhlmann will join SoFi's management team, giving him the chance to shift gears and provide a key missing piece to one of the most flush fintech startups in North America. "We've always wanted to hook up with someone that had a larger customer base, the way PayPal did with eBay," he said. "Moving ahead with [SoFi] basically doubles the speed. It would have taken us a number of years to add on asset products, and would have taken them a number of years to build an operating banking platform. It's a good match."
Using Zenbanx's mobile banking platform, which allows customers to save, send and spend money in multiple currencies, SoFi will be able to offer a wider range of financial products, including chequing and deposit accounts and credit cards. "Today we got a lot closer to being able to provide those products with the acquisition of Zenbanx," Mr. Cagney said in a blog post. "Zenbanx's focus on a fast and simple mobile experience on top of solid banking technology makes them a natural fit for SoFi and our members, who demand to be able to manage their money whenever and wherever."
Sean Silcoff