Personal-finance firm Credit Karma to launch checking account in US

(Reuters) – Personal-finance company Credit Karma said on Tuesday it would launch a checking account to U.S. members this year, making it the …

By Anna Irrera

2 Min Read

(Reuters) – Personal-finance company Credit Karma said on Tuesday it would launch a checking account to U.S. members this year, making it the latest fintech to join the crowded digital banking market.

Credit Karma Money Checking will initially be available only to those members who hold a savings account with Credit Karma, the San Francisco-based company said.

Opening a checking account will require no minimum balance or deposit requirements, it added.

The service will be available more widely in early 2021 with offerings being added throughout the year.

Credit Karma, which has 100 million members in the United States, Canada and the UK, is best known for letting customers access their credit scores and some other personal finance tools for free. It also offers third-party credit cards and loans to customers, tailored to their credit history.

Several fintechs have been expanding the types of financial services they offer and moving beyond their initial area of focus. Many are now seeking to attract deposits, often through enticing rates or low fees.

Credit Karma hopes its product will stand out among competitors because of how it connects to the company’s other offerings, Kenneth Lin, Credit Karma chief executive officer and founder, said in an interview.

“The differentiation is going to be the connection to the credit and a holistic view of your financial life,” Lin said. “It helps consumers build credit and pay off the debt and save for their future.”

Credit Karma will be offering its checking account through MVB Bank Inc, a member of Federal Deposit Insurance Corp, a U.S. bank regulator. Lin said the company does not have plans to apply for a banking charter.

“We are not looking to be a bank,” Lin said.

Reporting by Anna Irrera in London and C Nivedita in Bengaluru; Editing by Maju Samuel

$4 billion Credit Karma’s CEO reveals how a single meeting in 2008 saved the company from …

Kenneth Lin, Credit Karma’s CEO, spoke to Business Insider about how a meeting with a TransUnion executive in 2008 was critical to the startups’ …

As the CEO of a company valued at $4 billion, Credit Karma’s Kenneth Lin has had his fair share of high-level gatherings.

However, the most important meeting Lin’s ever had came long before Credit Karma’s unicorn status.

It was 2008 and the startup had been issued a 30-day termination notice for its business relationship with TransUnion. The credit agency offered Credit Karma access to its credit-score data, making it a crucial partnership for the startup that was aiming to provide free credit scores to its customers.

If Credit Karma’s relationship with TransUnion ended, the company would likely have folded shortly thereafter.

As Lin was running out of options just days before the notice came into effect, he sent a cold email to John Danaher, president of TransUnion Interactive, the consumer subsidiary of credit reporting agency TransUnion.

“I didn’t know him from anyone, and no one could give me an introduction,” Lin said. “So I just got the email address and wrote him like, ‘Hey, I am the CEO for this company that you just shut off. Can we talk?'”

Read more: How this woman went from a Pizza Hut employee to a founder of a $4 billion startup

After a couple days Danaher responded. As luck would have it, he was heading to Hawaii on vacation and would be stopping over in San Francisco, where Credit Karma was based, for a few days on business.

Lin was able to schedule an early-morning breakfast meeting with Danaher to make the case for why TransUnion should continue to work with Credit Karma.

“I remember that was one of the most restless nights of my life, still to this day,” Lin said. “I knew that everything was relying on the balance of that meeting.”

In the meeting, Lin pointed to the user base Credit Karma had already grown in its early days as a proof-of-concept for why the company could work. The startup had the potential to be valuable to TransUnion, he added, if it had the chance to continue to learn how best to work with its growing customer base.

See more: Credit Karma is acquiring a fellow fintech startup for UK expansion

At the end of the meeting, Danaher offered Credit Karma a stay of execution: It would continue to offer the company access to its credit-scores data while the two sides renegotiated a new agreement.

The whole experience, while stressful at the time, turned out to be a blessing in disguise, Lin said. Following the meeting, Credit Karma and TransUnion were able to establish an even better partnership that evolved beyond a traditional supplier-type agreement.

“We were brainstorming our product ideas, and we were coming to them with different innovative ideas in the space that I think would have been much more difficult had it been under the guise of the old contract, in which case they were just sending us the bill every month and we were just sending them the check,” Lin said.

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What’s the catch when it comes to a ‘free’ tax prep site?

“One reason Credit Karma got into the tax game, (Lin) said, is because it rounds out the data it needs to determine when customers might be eligible …

When it comes to filing your taxes, especially online, you have what can feel like a million options.

Some companies, such as Intuit TurboTax and H&R Block, offer some sort of “free” package — mostly to try and get you to upgrade: If you pay a little extra, typically just $50 to $100, the website will make the filing process much easier on you.

Other companies will let you file for free, as in, they’re not going to try to upsell you on a fancier package. But as a recent article in The Washington Post asks, what’s the price of free?

Meaning, what are you giving up in order to file free of charge?

The story looks largely at the website Credit Karma, and says if you use the site, you might be paying with your privacy.

Credit Karma CEO Kenneth Lin spoke with the Post about how the site operates.

“One reason Credit Karma got into the tax game, (Lin) said, is because it rounds out the data it needs to determine when customers might be eligible for, say, a new personal loan,” the story reads. “Credit Karma can make between tens and hundreds of dollars each time someone accepts one of its loan or card offers — and the more accurately it can target us, the more money it makes.”

Below is a screenshot from Credit Karma, explaining how the whole thing works:

And yes, this is the same Credit Karma site you’ve likely heard of, as it’s perhaps best known for doing what its name implies: providing people access to their credit scores.

But when it comes to tax services, Forbes once described Credit Karma as “Big Brother with benefits.”

The site doesn’t make money by selling data, but it does so another way.

“Its business is selling access to you through highly targeted offers on its website, which provides advice on how you can improve your credit,” the Post said. “Marketers waste money mailing card offers that we don’t want or can’t get approved for and have flocked to advertise with Credit Karma instead.”

So before you jump on board with ANY site that claims to be free, tech columnist Geoffrey A. Fowler recommends asking the following questions:

1. What information is being used?

2. Who is it being shared with?

3. How secure is it?

4. How long are they holding on to it?

It’s not that any of these sites are doing anything illegal. Many internet companies store your information and use it in all sorts of ways — it’s just that Credit Karma and similar sites are taking in your extremely sensitive data: income information, mortgage details, Social Security numbers, etc.

And just like most stories you read online, there are no final answers or definite recommendations here: It’s all just more information to be aware of.

If you’ve used Credit Karma for taxes in the past, and you decide to shut your account, it could take up to two years for the company to delete your data entirely. When you consent in the first place, Credit Karma has the legal right to use your data for 10 years, the Post added.

Ten years is a long time.

Going forward, it might be worth asking yourself: Is it worth it, paying a little extra to keep your data secure?

Graham Media Group 2019

When online tax prep is free, you may be paying with your privacy

Credit to Credit Karma’s CEO Kenneth Lin: He spoke openly with me about his business. One reason Credit Karma got into the tax game, he said, …

Nothing is certain except death, taxes … and tech companies making grabs for your data.

So this tax season, I started asking why, exactly, all those “free” online tax services are free? One used by more than a million Americans had an alarming answer: Credit Karma Tax, takes the intimate details of your tax returns — like how much you earn and pay for your mortgage — to target you with financial advertising.

I know it’s hard to argue with free. But for too long, we’ve been letting free technology blind us to a really important question: How is somebody going to make money from this? In Silicon Valley, an adage goes, “If the product is free, that means you’re the product.”

You probably already suspect products such as Intuit’s TurboTax and H&R Block offer limited free service as bait to sell you fancier paid services. Then there are a dozen free, no-upsell services run pro-bono by the tax-prep industry — but only for people who earn less than $66,000 per year. (Dubbed “Free File,” these services are often buried; you can find them linked directly off the IRS website.)

A third kind of free tax prep, offered by Credit Karma, is blazing a new path: paying with your privacy. Available since 2017, Credit Karma Tax is an extension of the credit score website that’s already used by 85 million people. The tax service is really free — even if you use complicated IRS forms. It makes money by showing you tailored “offers” for credit cards and loans based on a profile of your financial life, which includes your tax returns unless you adjust a setting to opt-out.

It’s a bold grab for personal data. It’s entirely legal. And it’s already inspiring other free services that want to target advertising using tax data.

Credit to Credit Karma’s CEO Kenneth Lin: He spoke openly with me about his business. One reason Credit Karma got into the tax game, he said, is because it rounds out the data it needs to determine when customers might be eligible for, say, a new personal loan. Credit Karma can make between tens and hundreds of dollars each time someone accepts one of its loan or card offers — and the more accurately it can target us, the more money it makes.

“We’re gathering information on behalf of the users,” he told me. “We help consumers find the very best financial services products leveraging the information algorithms on our site.” As Forbes once described Credit Karma, it’s Big Brother with benefits.

There’s a fine line between useful and creepy with surveillance. For some, Credit Karma’s offers might be acceptable, even time- and money-saving. To me, Credit Karma Tax is taking a business idea that hasn’t worked out well for us with Facebook and applying it to even more sensitive information.

To really understand what free costs, you have to follow the data.

Taped on my desk are four questions I’ve learned to ask any business that wants my data:

1. What information is being used?

2. Who is it being shared with?

3. How secure is it?

4. How long are they holding on to it?

They bring some clarity to the exchange we make with Credit Karma for free tax prep.

It uses perhaps the most intimate personal data outside of health records. No one needs reminding on that — Donald Trump has gone to great lengths to keep his taxes private. While credit bureaus and data brokers already collect information about your finances, some details are hard for that industry to come by, such as your cash flow, mortgage deduction and savings yield.

Today, Credit Karma says it is using income data from customer tax forms to inform its personal loan business. It isn’t, so far, using information like who’s about to get a big refund or bill — but Credit Karma also hasn’t imposed any limits on tax return data it could use in the future.

You do get the opportunity to opt out of syncing up your tax returns with the other data the company uses to target ads. Credit Karma won’t say how many people choose to opt out, and its software doesn’t present it as a choice about privacy.

So who does Credit Karma share your data with? “We don’t sell data. We don’t broker data. We don’t work with hedge funds. We’re squarely focused on creating a great user experience and being a trusted adviser,” said Lin. This is required, in part, by law. The IRS forbids tax preparers from selling or sharing taxpayer data without express consent.

Credit Karma, like Facebook, doesn’t need to sell data to make money. Its business is selling access to you through highly targeted offers on its website, which provides advice on how you can improve your credit. Marketers waste money mailing card offers that we don’t want or can’t get approved for, and have flocked to advertise with Credit Karma instead.

Lin disagreed with my Facebook comparison. “We’re not letting advertisers target you. What we’re actually doing is finding the products you are eligible for in the financial services market,” he said.

Credit Karma is not doing some of the things we’ve come to dislike about Facebook. It doesn’t have a system for third parties to access data, and advertisers have no way of retaining your data (unless you permit Credit Karma to pre-fill a loan or credit card application for you). Credit Karma is doing the things lots of other Internet companies do — just with a much more sensitive type of data.

How secure is your tax data with Credit Karma? In 2014, before it had a tax service, Credit Karma did get in trouble with the FTC for not securing its app, potentially putting credit card details and Social Security numbers at risk. It says it has fixed that now, offers security protections like two-factor authentication, and pays ethical hackers to look for flaws. Credit Karma says it hasn’t ever suffered a data breach.

Better hope it stays that way. When you consent to sync up your tax return in its marketing system, you give Credit Karma the legal right to use the data for 10 years. That’s forever for a start-up, during which time management could decide on new uses for your data. If you decide to shut your account, the company says it can take up to two years to delete your data entirely, due to regulatory requirements.

A page on Credit Karma’s website explains its business model, a move more free online services should emulate.

Is it worth it?

Assuming you don’t quality for one of the Free File services, doing taxes online might cost from $50 to $150.

My privacy is worth more than that, especially given the open-ended and long-term potential uses Credit Karma has for my tax data.

“Being able to file your taxes in a safe and easy way is a good value proposition,” Lin said.

You could use Credit Karma Tax and click that opt-out box. But Lin says that pulling all your data into one place is actually a big part of the site’s value. “If financial services companies are going to be leveraging this information, let us tell you how you can get ahead in that system,” he said.

People who use the offers picked by Credit Karma’s systems not only get better rates, he said, but end up doing less damage to their credit scores by applying for financial products they can’t get.

Those arguments make some sense when it comes to bringing transparency and control over the shadowy world of credit reports. But why add tax returns to tech company dossiers on us? The solution to a world where too much data is being collected is not more surveillance.

Silicon Valley is taking inspiration from Credit Karma’s model. When TurboTax users finish doing their taxes, some now get a prompt to import their data into a sister site named Turbo, launched in 2018. Run by Intuit independently from its tax prep software, Turbo also uses financial data to generate personalized advice and offers for credit cards and loans. (Sharing tax data is not a requirement to use any of TurboTax’s free services.)

Credit Karma is more upfront than many other data companies about how it makes money from our information. Its website has a page illustrating its business model, though it doesn’t tie it to the free tax prep.

There’s more than just an individual privacy concern at stake.

“This is the pay-for-privacy model,” says Adam Schwartz of the Electronic Frontier Foundation, a digital rights group in San Francisco. “I’m very concerned about us moving into a society of haves and have nots.”

Free can have all sorts of hidden costs.

When tax prep is free, you may be paying with your privacy

One used by more than a million Americans had an alarming answer: Credit Karma Tax takes the intimate details of your tax returns — like how much …

Geoffrey A. Fowler

Technology columnist based in San Francisco
Technology columnist

March 7 at 11:37 AM

Nothing is certain except death, taxes … and tech companies making grabs for your data.

So this tax season, I started asking why, exactly, all those “free” online tax services are free? One used by more than a million Americans had an alarming answer: Credit Karma Tax takes the intimate details of your tax returns — like how much you earn and pay for your mortgage — to target you with financial advertising.

I know it’s hard to argue with free. But for too long, we’ve been letting free technology blind us to a really important question: How is somebody going to make money from this? In Silicon Valley, an adage goes, “If the product is free, that means you’re the product.”

[Help Desk: Ask our tech columnist a question]

You probably already suspected that products such as Intuit’s TurboTax and H&R Block offer limited free service as bait to sell you fancier paid services. Then there are a dozen free, no-upsell services run pro bono by the tax-prep industry — but only for people who earn less than $66,000 per year. (Dubbed “Free File,” these services are often buried; you can find them linked directly on the Internal Revenue Service website.)

A third kind of free tax prep, offered by Credit Karma, is blazing a new path: paying with your privacy. Available since 2017, Credit Karma Tax is an extension of the credit score website that’s already used by 85 million people. The tax service is really free — even if you use complicated IRS forms. It makes money by showing you tailored “offers” for credit cards and loans based on a profile of your financial life, which includes your tax returns unless you adjust a setting to opt out.

It’s a bold grab for personal data. It’s entirely legal. And it’s already inspiring other free services that want to target advertising using tax data.

Credit to Credit Karma’s CEO Kenneth Lin: He spoke openly with me about his business. One reason Credit Karma got into the tax game, he said, is because it rounds out the data it needs to determine when customers might be eligible for, say, a new personal loan. Credit Karma can make between tens and hundreds of dollars each time someone accepts one of its loan or card offers — and the more accurately it can target us, the more money it makes.

“We’re gathering information on behalf of the users,” he told me. “We help consumers find the very best financial services products leveraging the information algorithms on our site.” As Forbes once described Credit Karma, it’s Big Brother with benefits.

There’s a fine line between useful and creepy with surveillance. For some, Credit Karma’s offers might be acceptable, even time- and money-saving. To me, Credit Karma Tax is taking a business idea that hasn’t worked out well for us with Facebook and applying it to even more sensitive information.

To really understand what free costs, you have to follow the data.

Show me the data

Taped on my desk are four questions I’ve learned to ask any business that wants my data:

1. What information is being used?

2. Who is it being shared with?

3. How secure is it?

4. How long are they holding on to it?

They bring some clarity to the exchange we make with Credit Karma for free tax prep.

It uses perhaps the most intimate personal data outside of health records. No one needs reminding of that — President Trump has gone to great lengths to keep his taxes private. While credit bureaus and data brokers already collect information about your finances, some details are hard for that industry to come by, such as your cash flow, mortgage deduction and savings yield.

Today, Credit Karma says it is using income data from customer tax forms to inform its personal loan business. It isn’t, so far, using information like who’s about to get a big refund or bill — but Credit Karma also hasn’t imposed any limits on tax return data it could use in the future.

You do get the opportunity to opt out of syncing up your tax returns with the other data the company uses to target ads. Credit Karma won’t say how many people choose to opt out, and its software doesn’t present it as a choice about privacy.

So who does Credit Karma share your data with? “We don’t sell data. We don’t broker data. We don’t work with hedge funds. We’re squarely focused on creating a great user experience and being a trusted adviser,” Lin said. This is required, in part, by law. The IRS forbids tax preparers from selling or sharing taxpayer data without express consent.

Credit Karma, like Facebook, doesn’t need to sell data to make money. Its business is selling access to you through highly targeted offers on its website, which provides advice on how you can improve your credit. Marketers waste money mailing card offers that we don’t want or can’t get approved for and have flocked to advertise with Credit Karma instead.

[Blindsided by your 2018 taxes? How to prepare now for your 2019 return.]

Lin disagreed with my Facebook comparison. “We’re not letting advertisers target you. What we’re actually doing is finding the products you are eligible for in the financial services market,” he said.

Credit Karma is not doing some of the things we’ve come to dislike about Facebook. It doesn’t have a system for third parties to access data, and advertisers have no way of retaining your data (unless you permit Credit Karma to pre-fill a loan or credit card application for you). Credit Karma is doing the things lots of other Internet companies do — just with a much more sensitive type of data.

How secure is your tax data with Credit Karma? In 2014, before it had a tax service, Credit Karma did get in trouble with the Federal Trade Commission for not securing its app, potentially putting credit card details and Social Security numbers at risk. It says it has fixed that now, offers security protections like two-factor authentication and pays ethical hackers to look for flaws. Credit Karma says it hasn’t ever suffered a data breach.

Better hope it stays that way. When you consent to sync up your tax return in its marketing system, you give Credit Karma the legal right to use the data for 10 years. That’s forever for a start-up, during which time management could decide on new uses for your data. If you decide to shut your account, the company says it can take up to two years to delete your data entirely, because of regulatory requirements.

A page on Credit Karma’s website explains its business model, a move more free online services should emulate.

Paying in privacy

That’s what you’re giving up. Is it worth it?

Assuming you don’t quality for one of the Free File services, doing taxes online might cost $50 to $150.

My privacy is worth more than that, especially given the open-ended and long-term potential uses Credit Karma has for my tax data.

“Being able to file your taxes in a safe and easy way is a good value proposition,” Lin said.

You could use Credit Karma Tax and click that opt-out box. But Lin says that pulling all your data into one place is a big part of the site’s value. “If financial services companies are going to be leveraging this information, let us tell you how you can get ahead in that system,” he said.

People who use the offers picked by Credit Karma’s systems not only get better rates, he said, but end up doing less damage to their credit scores by applying for financial products they can’t get.

Those arguments make some sense when it comes to bringing transparency and control over the shadowy world of credit reports. But why add tax returns to tech company dossiers on us? The solution to a world where too much data is being collected is not more surveillance.

[Why you should love that tax refund less]

Silicon Valley is taking inspiration from Credit Karma’s model. When TurboTax users finish doing their taxes, some now get a prompt to import their data into a sister site named Turbo, launched in 2018. Run by Intuit independently from its tax prep software, Turbo also uses financial data to generate personalized advice and offers for credit cards and loans. (Sharing tax data is not a requirement to use any of TurboTax’s free services.)

Credit Karma is more upfront than many other data companies about how it makes money from our information. Its website has a page illustrating its business model, though it doesn’t tie it to the free tax prep.

There’s more than just an individual privacy concern at stake.

“This is the pay-for-privacy model,” says Adam Schwartz of the Electronic Frontier Foundation, a digital rights group in San Francisco. “I’m very concerned about us moving into a society of haves and have-nots.”

Free can have all sorts of hidden costs.

Read more tech advice and analysis from Geoffrey A. Fowler:

Hands off my data! 15 default privacy settings you should change right now.

Don’t Marie Kondo your papers and photos into the trash. Save them in the cloud.

Samsung’s new S10 and Galaxy Fold do some awesomely strange things with screens