SoFi Acquires Banking and Payments Platform Galileo in $1.2 Billion Fintech Exit Deal

In the rapidly evolving fintech landscape, another major exit has taken place, with consumer financial services platform SoFi announcing its acquisition of payments and bank account infrastructure company Galileo for a whopping $1.2 billion in total cash and stock. This significant move highlights the increasing importance of fintech infrastructure companies and underscores SoFi’s ambitions to expand its suite of finance products.

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About Galileo

Founded in 2000 by Clay Wilkes, Galileo has been bootstrapped to profitability over the past two decades. The company provides APIs that enable fintech companies like Monzo and Chime to easily create bank accounts and issue physical and virtual credit cards, among other services. This innovative approach simplifies banking regulations and financial rules for fintech companies, allowing them to focus on their core business.

Galileo’s Success Story

The company has found particular success in the United Kingdom, where all five of the country’s largest fintechs are customers. Galileo’s global transaction volume has also seen significant growth, processing an annualized $45 billion last month, up from $26 billion in October 2019 – nearly doubling in just six months.

Why SoFi Acquired Galileo

SoFi, led by ex-Twitter COO Anthony Noto, aims to leverage Galileo’s infrastructure to power its expanding suite of finance products and offer another revenue source outside of consumer services. While SoFi was founded a decade ago to offer ways to secure better financial terms for student loans, it now offers a diverse range of consumer financial options, including loan, investment, and insurance products as well as cash and wealth management tools.

SoFi’s Ambitions

With Galileo on board, SoFi has added a clear B2B revenue component to its business. This strategic move reflects the company’s commitment to expanding its offerings and increasing its market share in the fintech space.

Accel’s Return on Investment

As part of the acquisition, Accel Partners led a $77 million Series A funding round into Galileo last year. According to sources familiar with the deal, Accel’s return on investment is more than 4x, considering the equity was held for roughly half a year. This impressive IRR multiple underscores the value that fintech infrastructure companies like Galileo bring to investors.

Embedded Finance: The Rise of Fintech Infrastructure Companies

The rapid expansion in fintech valuations has led investors and strategics to focus on companies that empower those fintechs, such as payment processors, bank account infrastructure providers, and other essential services. This trend is exemplified by Visa’s acquisition of Plaid for $5.3 billion earlier this year.

Conclusion

SoFi’s acquisition of Galileo represents a significant milestone in the evolution of the fintech industry. As fintech infrastructure companies continue to play a crucial role in enabling innovation, their value will only grow in importance. SoFi’s strategic move underscores its commitment to expanding its offerings and increasing its market share in the rapidly changing fintech landscape.

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