Tuesday after the market close, consumer credit fintech Oportun announced they would purchase Digit, a neobank savings app.
The move will combine the two to create a full-featured fintech super app, complete with AI investing, savings, and soon debit and credit cards.
Oportun aims to purchase Digit for about $212.9 million, depending on when the deal finalizes in late 2021— early 2022, firm CEO Raul Vazquez said.
Nonetheless, more than 100 Digit employees and current CEO Ethan Bloch will become a part of the Oportun ecosystem. The deal was sweetened recently: Digit announced they would be adding a neobanking product just last week.
“We think that when you look at that product assortment that we’re going to have, we’re setting ourselves apart from the companies that are on that page,” Vazquez said. “And really, we’re establishing a new paradigm of being a one-stop-shop for consumers and using technology to try to find effortless ways, right, to take care of all of their needs.”
By leaning on AI and technology together with Ethan and the Digit team, Vazquez said, they will be able to anticipate problems on behalf of the customers in a powerful way. After the move, Oportun would have a combined 1.4 million total customers, revenue sources from subscriptions, transactions, and interchange fees.
Credit cards extended
Vazquez said the new venture would extend credit cards with a $1,000 limit to borrowers without credit scores while simultaneously using Digit’s automated savings to help users budget and protect accounts from overdraft.
Oportun just announced stellar Q3 earnings, with a $159.1 million total revenue up 16% from Q2 and a rise in aggregate originations of over 119% year-over-year. Oportun has helped extend more than $11 billion in credit to low to no credit score customers and has been a Community Development Financial Institution since 2009, Vazquez said.
Digit has helped more than 600,000 customers save seven billion dollars since its inception. The two CEOs met five years ago and have kept in touch ever since with quarterly updates.
“I was really struck by just the strong sense of mission that he and the organization have of trying to use technology to make saving effortless,” Vazquez said. “Also, the way that he just talked about his customers with just a great deal of compassion and respect.”
At the beginning of 2021, Vazquez said they began to look at combining their firms: “We felt that combining these two great businesses would give us an opportunity to do more together than we could ever do apart.”
Move ups timetables
The move helps update both firms’ timetables: instead of Digit worrying down the road how they will build a credit platform for their customers, Oportun will provide, and visa versa.
With the help of Digit, Oportun has set its eyes on neobank competitors like Chime, Varo, and Upstart: though none of their new peer groups have a combination of personal loans, lending as a service, savings, and mobile banking, they said in an investor presentation.
Oportun and Digit both partner with MetaBank in South Dakota for banking services. Vazquez said it was no surprise; they had both chosen MetaBank because it fit so well into their goals.
Oportun pulled back an application for its banking charter this past year, but Vazquez said he expects to apply again after Digit and Oportun combine. He said one of the significant reasons Oportun rescinded their banking charter with the OCC was because this transaction was on the horizon.
“So this is a really exciting day for our organizations,” Vazquez said. “It really signifies the beginning of an exciting new chapter for all of us.”