Robinhood Markets announced on Thursday (June 22) the acquisition of San Francisco-based FinTech firm X1, which offers users a no-fee income-based credit card with rewards on each purchase.
The $95 million cash deal, which is expected to close in Q3 2023, will enable Robinhood to offer its customers access to credit, bringing the company “closer towards our goal of serving the entirety of our customers’ critical financial needs,” Robinhood’s CEO Vlad Tenev said in a statement.
Deepak Rao, CEO and co-founder of X1, added that the FinTech firm was founded to create a different kind of credit card with an unparalleled customer experience, similar to Robinhood’s mission to make financial markets more accessible to all. “We share the same ethos and joining together with Robinhood we’ll be able to offer an enhanced credit card experience,” Rao noted.
While Robinhood currently earns interchange fees from its debit card, the acquisition of X1 is expected to significantly expand its revenue streams and give the company access to the lucrative credit card market and the interchange fee revenue that comes with it.
X1 has raised $62 million in venture-backed funding since its 2020 inception from investors, including Rogue Capital, Spark Capital, FPV Ventures and Soma Capital. X1’s co-founders, Deepak Rao and Siddharth Batra, will oversee the new credit card business for the company, with Rao serving as general manager of credit cards.
The acquisition of X1 is a significant step for Robinhood as it continues to diversify its offerings and revenue streams. With transaction-based revenue declining for the fifth straight quarter in Q1 2023, Robinhood executives have emphasized the company’s ability to diversify further via subscription revenue from its Gold account, retirement accounts, and debit card offerings.
Earlier this month, Tenev said its customers are switching to high-yield deposits amid recent banking sector turmoil, resulting in total deposits into the company’s Gold Sweep program surpassing $10 billion since the firm’s last earnings result.
That increase is happening as “banks are not passing along that much yield to their customers,” added Tenev, whose comments were reported by Seeking Alpha.