Robinhood Acquires Credit Card Startup X1 for $95 Million

Crypto and stock trading app Robinhood has taken a new step to diversify its business portfolio by acquiring credit card startup X1 in a $95 million deal. X1, a fintech firm, offers free trial and single-use credit cards, as well as an income-based rewards credit card. The deal is expected to be completed by the end of September, Robinhood said in a statement on 22 June, adding that the acquisition is an "important step" towards a deep relationship with its existing customers.

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This Acquisition is Very Important for Both Companies

According to Robinhood's latest earnings report, the number of monthly active users fell from 16 million in the first quarter of 2022 to just under 12 million in the same period this year. The company also experienced a 30 per cent year-over-year revenue decline for its crypto trading business. However, the company's crypto revenue fell from $ 54 million in the first quarter of 2022 to $ 38 million in the first quarter of 2023.

This acquisition is Robinhood's fifth acquisition in the last four years. In 2019, the company acquired the daily financial newsletter MarketSnacks. Then in 2021, the cross-exchange crypto trading platform Cove Markets, the recruitment company Binc, and the shareholder platform Say, signing deals in three different areas. Before problems erupted in the crypto market, Robinhood acquired UK-based crypto asset firm Ziglu in April 2022.

The current value of the X1 is unknown. However, the company claimed that there were 500,000 people on the waiting list for a credit card in 2022. Since 2020, the startup has received over $60 million in investments from venture capital firms such as Craft Ventures, Soma Capital and FPV. The company also announced a 50 per cent increase in its valuation, most recently raising $15 million in December last year.

Robinhood is Moving into Different Fields

In a statement, Robinhood describes this agreement as an important step in its journey to expand its product offerings and deepen its relationships with existing customers. It is estimated that the main reason for this agreement is both the slowdown in the crypto market and the decline of the company's main trading business in May. Presumably, Robinhood wants to diversify its business.

Robinhood will enter the credit card business with the card interchange fee revenue it will generate with the acquisition of X1. Robinhood currently charges an interchange fee on debit cards. The startup first made headlines with a unique model that allowed it to extend credit to customers based on their income, not their credit score. X1 does not charge an annual fee for its stainless steel Visa card. It charges no late fees or foreign transaction fees and rewards users with "points". The company also claims to have software features that work with the card.

X1 founders Deepak Rao and Siddharth Batra will be responsible for managing the new business for Robinhood, with Rao serving as general manager of credit cards. Robinhood said it expects this deal to be finalised in the third quarter of this year.