Why Rocket Mortgage actually acquired Truebill for $1.3 Billion

Rocket Mortgage (one of the largest lenders in the US) acquired Truebill (a budgeting app that cancels people’s subscriptions) for $1.3 billion dollars in cash at the end of 2021. This is one of the priciest Personal Financial Management (PFM) acquisitions EVER. Here are some of the other PFM acquisitions over the last decade:

Here what we know about Truebill (at time of acquisition)

• Founded in 2015
• 2.5 million users (half of which came in the last year)
• Saved their customers a total of $100MM by negotiating or cancelling subscriptions (Netflix, Spotify, etc)
• Annual revenue was “on track” to reach $100MM (Note* Actual revenue is unknown to the public)

Here what we know about Rocket Mortgage (Ticker: RKT)

• One of the largest and oldest loan originators in the US (Founded in 1985)
• Has 10% of the $2.2 trillion mortgage market
• Generated $13 billion in annual revenue (2021)
• Market cap of $28 billion

Given Truebill’s annual revenue expectations of $100MM, it will take Rocket roughly 13 years to get their money back on the acquisition. So why did a company that makes all their money from issuing loans purchase a budgeting/PFM app for over a billion dollars? DATA, DATA, DATA.

When Rocket Mortgage originates a loan, they use the FICO credit score to determine a borrower’s interest rate. The lower the credit score, the higher the rate. In recent years, the credit score has received criticism for the inherent flaws in its scoring system. For example, if you’ve never had debt, you won’t have a credit score. What’s worse is if you have debt but saved enough to pay it off entirely, doing so can actually hurt your score. And if you’re reading this article thinking,“I’m 25 and have an amazing credit score on Credit Karma — it’s not that hard” — here’s the potential reality: if you don’t have multiple types of debt (credit card, mortgage, student loans, etc), your CK credit score will likely be different from the one a lender will see, resulting in a higher than expected interest rate. It’s a trap many Americans have fallen victim to. Imagine you’re not allowed to purchase your first beer at 21 unless you’ve had a beer before. And the more you drink, the cheaper your drinks will be because you’ll be seen as a more trustworthy drinker. Does that seem backwards? It is. Welcome to America’s credit system.

So, back to the original question: How can Truebill’s data help Rocket Mortgage?

To use Truebill, you need to connect your bank accounts and credit cards so they can analyze your transactions. Where Rocket Mortgage likely sees $1.3 billion in value is in the 2.5 million users they’re getting as part of the deal. A company’s value (especially in fintech) seems to be based more on the relevancy of the data they generate than the actual service provided. In the case of Truebill, I believe the service they provide (negotiating subscriptions) matters less to Rocket Mortgage than Truebill’s ability to grow users and collect valuable data.

How Rocket Might Use The Data (My Guess)

In the near future, I expect Truebill users will be able to apply for loans directly through Rocket Mortgage. Because Rocket can analyze a user’s transactions, the user might get a better interest rate. It’s still early, but this model could completely disrupt the current credit system.

Every company today collects data, and though the term data collection has become something of a dirty word, when done appropriately and honestly, it can tremendously benefit users and industries alike.

The Last Frontier: Savings Habits (Where Investii Comes In)

Analyzing risk based on spending is just the beginning. Imagine if your savings habits were considered when you applied for a loan? If you split rent with roommates to save up, contribute to a retirement account, and consistently maintain a positive personal savings rate, don’t you think you should be perceived as a less risky borrower? We think so. Investii’s AI-powered platform is designed to help people build wealth by automating transfers to savings, investment, and retirement accounts, all from one app. The credit system relies solely on a borrower’s history of debt because it lacks visibility into savings behaviors — Investii is changing that. We see a world where your history of debt shouldn’t define you. Create a free Investii account and join the movement! Mobile app coming soon.