NEW YORK (Reuters) - Online student lender Social Finance Inc has agreed to acquire payments and banking technology provider Galileo Financial Technologies for $1.2 billion in cash and stock, the companies said on Tuesday.
Galileo’s platform provides technology to allow companies to easily offer a range of financial services to consumers and businesses, including checking and savings accounts, direct deposits, ACH transfers and bill payments.
San Francisco-based SoFi already uses Galileo’s technology for its cash management account service SoFi Money, as well as some of its other offerings, the company said.
The companies will work together to offer SoFi’s products to Galileo’s partners, and to develop new financial technology services, the companies said. Galileo’s clients include digital banks Chime, Monzo and Revolut, trading startup Robinhood and money transfer company TransferWise.
Salt Lake City-based Galileo will continue to operate as an independent subsidiary of SoFi Inc, with current CEO Clay Wilkes at the helm, the companies said.
The SoFi acquisition comes amid a dearth of deals due to the coronavirus pandemic. Global mergers and acquisitions activity plunged 28% in the first quarter to its lowest level since 2016, according to Refinitiv data.
The move also underscores a significant push by SoFi beyond its core student lending offering, which could help diversify its revenue stream at a time when lenders may see a rise in coronavirus-related defaults.
“We’ve been preparing for two years for an eventual recession,” SoFi CEO Anthony Noto said in an interview. “We have started executing our playbook.”
SoFi, one of most well-funded fintech companies in the United States, grew quickly following the 2007-2009 financial crisis by refinancing at cheaper rates student loans for strapped-but-promising graduates. It has since expanded its offering to its more than 1 million “members” beyond lending to include investment management and cash management.
Noto said SoFi had become more judicious about who it is underwriting in the current economic environment, to make sure borrowers have the ability to repay the loans.
He said he believes more consumers will now turn to digital financial services, rather than in-person offerings.
The deal will enable SoFi to increase the types of these services it can offer and extend the reach of its existing products to other Galileo clients, helping it expand and diversify, the company said.
“These are products that many of our leading fintech clients are asking for.” said Wilkes, CEO of Galileo.
The deal is subject to regulatory approvals, the companies said.
Reporting by Anna Irrera; Editing by Nick Zieminski and Tom Brown
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