An integration between two of Intuit’s top acquisitions, consumer financial technology platform Credit Karma and TurboTax tax management software, will help put the former’s new U.S. checking account – Credit Karma Money Spend – in the hands of more consumers.

The integration will provide a seamless process for getting refunds to eligible taxpayers when they file their taxes with TurboTax – and then turn those taxpayers into Credit Karma checking accountholders. Filers on TurboTax will have the ability to open a Credit Karma Money Spend account and have their refund sent directly to that new checking account. Users then can access the full Credit Karma Money experience – for example, setting up direct deposit and adding debit cards to their digital wallets – from within TurboTax. The checking account’s Instant Karma feature also encourages users to make payments with their Credit Karma Money Spend accounts by offering monetary rewards for actions like on-time credit card bill payments and automating direct deposits.

“We believe consumers should have a checking account that helps them make financial progress, which is why we created Credit Karma Money Spend,” Credit Karma founder and CEO Kenneth Lin explained. “We’re starting 2021 off by leveraging our relationship with Intuit to bring Credit Karma Money to millions of tax filers this tax season.” Lin referred to tax refunds as “the biggest paychecks” many Americans receive, and added that getting taxpayers the refunds they are owed and helping them put that money to work “(maximizing) their day-to-day spending and billpay” is a critical role the new integration will play.

Acquired by Intuit in a deal just completed in December, Credit Karma is among Finovate’s earliest alums, demonstrating its consumer credit score monitoring platform back in 2008. Now with more than 110 million members in the United States, Canada, and the U.K., Credit Karma offers a wide range of financial wellness solutions for individuals including identity monitoring, credit cards and loan shopping, insurance, high-yield savings accounts and, most recently, its new checking accounts backed by bank partner MVB Bank.

The integration news comes in the wake of a flurry of recent criticism that Credit Karma’s credit scores varied from what users were expecting when engaging with credit card companies or prospective lenders. The differences have since been explained – Credit Karma uses a credit score model, VantageScore 3.0, that not only examines factors other than those traditionally considered for FICO scores, but also can weigh like factors differently. But the issue may reflect a growing trend of popular annoyance with some of the ways fintechs are able to provide the services they do. This “Robinhood Syndrome” is a challenge that is only likely to grow as more customers – with varied expectations and financial sophistication – continue to migrate to fintech platforms.

Photo by Joslyn Pickens from Pexels

From in-house innovation to outright acquisition, businesses have myriad paths to consider when looking to expand their product portfolios. We learned late last week that mobile payments company Square has taken one of the less flashy routes to growing its offerings: paying $50 million in cash for Credit Karma’s tax business. Square will add the service’s DIY tax filing functionality to its own Cash App.

The free tax filing option will be featured along with the app’s other financial tools, including P2P payments, Cash Card, direct deposit, and the ability to make fractional investments in stocks and bitcoin. Cash App was launched by Square seven years ago as a P2P money transfer service and has grown into an integrated financial ecosystem with more than 30 million monthly active customers as of June 2020.

“We created Cash App to provide more access to the masses of people left out of the financial system and are constantly looking for ways to redefine our customers’ relationship with money by making it more relatable, instantly available, and universally acceptable,” Cash App lead Brian Grassadonia said.

One in two tax filers – a total of 80 million taxpayers – prepared and filed their own Federal income taxes electronically in 2020, according to the IRS, and the trend is expected to accelerate. Credit Karma Tax Director of Engineering Patrick Fink underscored this point, noting that despite the “challenge” of filing taxes, more customers are transitioning toward filing taxes on their own. “Credit Karma Tax provides a seamless, mobile-first solution for individuals to file their taxes at no cost,” Fink said. “We’re excited to be joining an entrepreneurial team and continue to build simple, innovative tools for Cash App customers.” Credit Karma tax processed more than two million tax filers last year.

The acquisition is expected to close by the end of 2020 and is subject to customary closing conditions.

Square’s investment in its Cash App is timely. At the beginning of the month, the company noted in its third quarter financial reporting that Cash App had generated more than $2 billion in net revenue and $385 million of its gross profit for the quarter. The performance reflected gains of 5.74x and 2.12x, year over year, respectively.

The timeliness of the transaction also has a lot to do with Intuit’s acquisition of Credit Karma, which was cleared by the U.S. Department of Justice last week. Announced at the beginning of the year, the $7 billion deal is Intuit’s largest acquisition to date, and by shedding Credit Karma’s tax business, an obstacle to the union between the two companies has been removed. Intuit is the developer of it own online tax filing service, TurboTax.

“We are very excited to reach this important milestone today,” Intuit CEO Sasan Goodarzi said. “This brings us one step closer to transforming personal finance by making it simpler for consumers to find the right financial products, put more money in their pockets, and provide financial expertise and advice.” 

The Credit Karma Tax announcement also comes one month after Square announced a $50 million investment in bitcoin, a sum the company said represented “approximately one percent” of the firm’s total assets as of the end of Q2 2020. Bitcoin trading has been available on Square’s Cash App since 2018 and, as of 2019, the company’s Square Crypto team has been contributing to bitcoin open-source efforts.

“We believe that bitcoin has the potential to be a more ubiquitous currency in the future,” Square Chief Financial Officer Amrita Ahuja said. “As it grows in adoption, we intend to learn and participate in a disciplined way. For a company that is building products based on a more inclusive future, this investment is a step on that journey.”