Prosper Marketplace, a pioneering peer-to-peer online lender based in San Francisco, announced on Thursday that it will acquire Israeli BillGuard, a personal finance startup with apps to track, manage, and protect individuals’ bank accounts. This marks Prosper’s second acquisition, the first being American HealthCare Lending in January. While neither side will confirm the exact terms of the deal, Geektime sources suggest that the acquisition is close to $50 million.
BillGuard, whose financial security apps have been particularly popular in tracking attempts at consumer level fraud, has been a darling of top Israeli startup lists such as Fast Company‘s and Business Insider‘s since launching in 2010. The company, founded by Raphael Ouzan and Yaron Samid, is one of the strongest personal finance and security startups out there. Even though its $16.5 million in funds raised pales in comparison to Prosper’s behemoth $354.9 million, the news of its somewhat premature acquisition offer still surprised us.
But Raphael Ouzan, BillGuard’s co-founder, CTO, and head of product, assured us that the acquisition will help BillGuard grow. “One of the great things about this, and why I am happy about it, is that we’re not giving up on this opportunity,” Ouzan explained to Geektime. He added that, “We will keep the app, and keep innovating to change the face of personal finance. The difference now is not only do we have much more cash and reach to do it, but we’re leveraging a new age banking platform, Prosper. They’re growing like crazy and in practice, reinventing the face of banking as far as lending goes.”
Yaniv Feldman: We understand their intentions for Israeli R&D operations, but do you really think that BillGuard could work under Prosper? Financial institutions and companies wouldn’t want to collaborate with a competitor. When BG was an independent company with an aim to provide a service to all consumers (which isn’t competing with the banks and credit card companies), giving you guys data made since. But now that you are working under an institution that is somewhat of a direct competitor to all the other financial institutions you need data from, I’m not so sure they’d be so eager to collaborate.
Raphael Ouzan: Prosper is a startup just like us (just with 520 people) and they do not compete with banks. Their play is actually to work with banks. For example, they just announced a bank integration where they are lending for them and will announce more of those. More importantly, a lot of their customers are actually banks. Banks fund loans in even more volume than private lenders.
Prosper is a marketplace, an interface itself. It doesn’t lend any money but rather connects banks and retail investors to lenders. Will the banks be able to compete on the interface? I really don’t think so because it requires more than trust from consumers these days. Consumers expect more.
So will consumers be more wary to give us credentials now that we’re Prosper? I don’t think so, especially when it can help them get better deals on their loan (because of more data to profile them) or even allow them to get a loan if they couldn’t otherwise.
I still can’t see exactly how BillGuard and its current models fit into the greater picture. Can you explain?
Prosper ultimately wants to be more than a lending platform. They want to be the address for financial well being to consumers. Become the interface. That’s how BG come in. Does that make sense?
That’s an interesting vision, which many companies share. I am sure that with you guys they have a much better chance in doing it.
I hope so too. The good thing is that no lending companies have moved in that direction yet. When you think about it, these kind of companies are run by finance people. They understand underwriting but they don’t understand how to make consumer products. I like that Prosper has the gut to do this and out of Israel.
They also understand that the data we’re bringing can change the business of getting financial products to be much smarter and much better for the consumer. Today it all relies on the credit score and some smart algorithms leveraging small data sets compared to what we have.
What will happen to your roles post-acquisition?
Nothing changes in terms of our roles. We will keep working. We just have to grow and will have much more of a budget and ability to use Prosper’s channels.
BillGuard will not only remain as a product but will also be immediately distributed to all of Prosper’s consumers. Our responsibility will be to acquire more customers through the BG channel.
Laura Rosbrow contributed reporting.