In 2022, the startup X1 had a staggering 500,000 individuals on standby, anticipating their credit cards. Over the previous couple of years, the company successfully managed to secure an impressive $62 million from a number of venture capitalists.
The well-known application Robinhood, offering cryptocurrency and stock trading services, recently stepped up its diversification game by acquiring X1, a burgeoning credit card startup. This significant deal was struck at $95 million. X1 is renowned for providing income-based credit card services, packed with reward programs and options for free trial and single-use credit cards.
As per Robinhood’s announcement on June 22, the transaction is set to be finalized by September’s conclusion. This new development is perceived by Robinhood as a significant stride towards fostering a deeper bond with their existing client base.
In addition to offering debit card services to their customers, Robinhood now looks forward to a new revenue source following this acquisition. X1, on July 18, 2022, made a public announcement regarding their monthly volume of $50 million and their optimistic expectation of reaching a $1 billion annual spending total by the year’s close.
Robinhood’s latest financial report reveals a dip in their monthly active user count, dropping from 16 million during Q1 of 2022 to just under 12 million in the corresponding quarter this year. Furthermore, the company experienced a 30% fall in their year-on-year revenue generated from their cryptocurrency trading services, reporting $38 million for Q1 2023 compared to $54 million during Q1 2022.
With this latest addition to Robinhood’s portfolio, it marks the fifth acquisition in the last four years as per Crunchbase data. Previous notable acquisitions include MarketSnacks, a daily financial newsletter in 2019, Cove Markets, a cross-exchange cryptocurrency trading platform, Binc, a hiring firm, and Say, a platform for shareholders. Robinhood further extended its reach into the UK’s cryptocurrency market by acquiring Ziglu in April 2022, just before the onset of the crypto winter.
While the current market valuation of X1 is yet to be disclosed, back in 2022, the company boasted a waitlist of 500,000 people eagerly awaiting their credit cards. X1 has managed to raise over $60 million since 2020 from a range of venture capitalists, including Craft Ventures, Soma Capital, and FPV, a venture firm co-founded by Google Analytics’ Wesley Chan, who also happens to be an investor in both Robinhood and financial services company Plaid.
Robinhood’s latest acquisition of X1 can be seen as a strategic effort to expand its services, possibly to regain its lost users. By integrating the credit card services offered by X1, Robinhood can enhance its financial toolkit provided to its users, thereby enhancing user loyalty and engagement.
Moreover, this acquisition adds to the growing trend of consolidations in the fintech sector as companies endeavor to provide a broader suite of financial services. Robinhood’s acquisition could set an example for other fintech companies considering a similar pathway.
The blending of trading and credit services could point towards the future direction of the fintech industry. Companies that offer a holistic solution for financial services might gain a competitive edge, ultimately reshaping the landscape of financial services.