Analysing The Political Economy

Why Has Apple Acquired A UK Fintech Firm?

With little fanfare accompanying the move, US tech giant Apple has acquired Credit Kudos. The acquisition closed five weeks ago, with Credit Kudos valued at $150 million. However, there remains some speculation over exactly why Apple decided to make this particular move.

Credit Kudos is a UK-based open-banking start-up that helps lenders make better decisions and deliver finely-tuned credit scores.

The company is authorised by the Financial Conduct Authority (FCA). “Over the past year it’s been increasingly difficult for lenders to understand the current financial situation of individuals and businesses,” said Credit Kudos’s founder, Freddy Kelly, of the partnership. “Traditional credit reports are not up-to-date or extensive enough, but open banking data allows us to provide lenders with a real-time, holistic overview of an individual or businesses’ finances, as well as a prediction of future circumstances.”

So, what specifically about such a business model has garnered the attention of Apple, then? In short, it’s difficult to make any firm conclusions at this stage.

Apple has a habit of acquiring something and then going silent for two years. Expect the same here,” Simon Taylor, co-founder of digital challenger consultancy 11:FS, told fintech news publication AltFi. Nonetheless, this lack of clarity hasn’t stopped AltFi from positing potential motivating factors underpinning the acquisition, having discussed it with a number of industry insiders. It posits that the most likely explanation is that Apple is eyeing the launch of its credit card in the United Kingdom.

Having rolled out Apple Card in the United States in partnership with Goldman Sachs, the tech giant could now potentially be setting its sights on the UK. Given Credit Kudos’s specialism—providing a rapid alternative to traditional credit scoring via open-banking methods—AltFi contends that it could be possible that Apple wants to bring its services in-house to support the launch of its new product in the UK.

But not everyone is convinced that this is Apple’s main aim. “A few folks have suggested this could be a way to launch Apple Card (or path to Apple Card) in the UK,” according to Taylor. “The idea being lower-income segments would be worthy of an Apple Card. This is no doubt a possibility, but it’s also an expensive market entry for what could have just been a partnership with an issuer like they did in the US.”

Perhaps a more likely explanation for the purchase can be found in a March 30th article from Bloomberg titled “Apple Working to Bring More Financial Services In-House”. The company’s initiative is being dubbed “Breakout” and reportedly involves developing its own payment-processing technology and infrastructure for future financial products, thus lowering its reliance on external partners over time.

“A multiyear plan would bring a wide range of financial tasks in-house,” the article stated, based on the information it had received from unnamed sources. It also identified payment processing, risk assessment for lending, fraud analysis, credit checks and additional customer-service functions such as handling disputes as some of the key services being targeted by Apple.

With Apple seemingly stepping up its efforts to bring a range of financial services in-house, it would certainly seem that the acquisition of an open-banking company that improves loan-underwriting capabilities would help it achieve its financial-services ambitions.




European financial review Logo

The European Financial Review is the leading financial intelligence magazine read widely by financial experts and the wider business community.