GreenSky Scores $3.6 Billion Valuation From Fifth Third Bancorp
September 13 2016 - 01:10AM
Dow Jones News
GreenSky LLC, which provides technology to banks and merchants
to make loans, has raised $50 million from Fifth Third Bancorp in a
deal that values the Atlanta startup at $3.6 billion, according to
the companies.
The investment, set to be announced as soon as Tuesday, makes
GreenSky one of the most valuable privately held financial
technology startups, more than doubling its valuation from a 2014
fundraising.
The firm enables banks to make loans to consumers for home
improvement and other projects. It started growing that business in
2012. Since then, banks have lent nearly $5 billion to customers
via merchants using GreenSky's system. But the firm is less well
known than rivals such as Social Finance Inc. or LendingClub Corp.,
in part because it doesn't sell loans to investors, make loans
using its own capital or advertise loans directly to customers.
Instead, the firm partners with 14 banks including Regions
Financial Corp. and SunTrust Banks Inc. The banks then make loans
online or through a GreenSky mobile app to customers of some 12,000
merchants ranging from retailers such as Home Depot Inc. to
individual contractors.
The investment by Cincinnati-based Fifth Third is part of a
broader partnership with GreenSky. The bank will commit to lending
up to $2 billion via GreenSky's existing network of merchants, and
will also integrate GreenSky's technology into its own mobile app.
The bank will also make the product available to its own merchant
clients who want to provide loans to customers.
Increasingly, upstart lenders such as Avant Inc., On Deck
Capital Inc. and others are partnering closely with banks to
originate and fund loans, rather than aiming to take on banks
head-on for customers and capital. The moves have been driven by
high costs finding customers and a shaky capital market for raising
money.
"We're not competing with banks, and we're not attempting to be
a lender," said David Zalik, GreenSky's co-founder and chief
executive. "We're a technology company."
The loans made via GreenSky are aimed at people with strong
credit, with an average score of about 760 out of a range of 300 to
850.
At Home Depot, a project loan from GreenSky offers up to $40,000
at an annual percentage rate of 7.99%, with a payback term of 84
months. Borrowers apply online or in-store and receive a card that
allows them to make purchases over a six month window, before
repayment begins.
GreenSky is the largest of several companies aiming to offer
U.S. loans where people might have previously used credit cards,
including Affirm Inc. and Klarna Inc., which partner with online
retailers, and Promise Financial Inc., which offers loans via
wedding planners.
Tim Spence, chief strategy officer at Fifth Third, said that the
bank was "witnessing a bit of a shift away from credit-card or
home-equity based borrowing toward purchase-specific borrowers." He
said that younger customers in particular were using loans "as a
mechanism for maintaining financial discipline" versus open-ended
revolving credit.
Mr. Spence said that Fifth Third had considered building its own
online personal lending portal, as banks such as Goldman Sachs
Group Inc. are doing, but opted instead to partner with GreenSky
after reviewing the technology of several online lenders. Fifth
Third will pay GreenSky to license its software.
GreenSky doesn't disclose revenue, which it generates by
charging merchants a fee and by charging banks fees to service the
loans they make. It currently has more than 670 employees. Mr.
Zalik said GreenSky is profitable and has bank commitments for up
to $7 billion worth of loans.
There are no plans for a public offering, Mr. Zalik added. In
2014, GreenSky raised $300 million in equity capital from TPG,
Wellington Management, and technology venture funds DST Global and
Iconiq Capital, on top of earlier venture funding including from
QED Investors. In its recent deals, GreenSky has been advised by
investment bank Financial Technology Partners LP.
Write to Telis Demos at telis.demos@wsj.com
(END) Dow Jones Newswires
September 13, 2016 00:55 ET (04:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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