‘Change is hard for banks’: Behind Amount’s acquisition of Linear

Amount, a banking technology provider offering account opening, loan origination and BNPL financing solutions, recently announced the acquisition of Linear, an SMB loan and account origination platform, for $175 million.

Amount helps banks build simple digital lending experiences while streamlining their customer acquisition, funnel and performance assessments, as well as risk analytics. Its clients include HSBC, PNC, Barclays and TD Bank, among other financial institutions collectively managing just over $3.1 trillion in US assets and servicing more than 50 million U.S. customers.

The fintech is a spinoff of Avant, an early online consumer lending business that wanted to expand its offering by helping banks with their digital lending operations. It launched Amount as its B2B service around seven years ago. 

Amount reached a $1 billion valuation after raising nearly $100 million in venture capital last year. The funding was intended to be used in part to pursue acquisition opportunities to add new products or features - Linear acquisition is in line with this strategy.

Linear’s platform helps banks simplify the borrowing and account opening experience for small business owners, as well as improving loan and deposit origination workflows for products ranging from business credit cards, loans, lines of credit and SBA loans. The company’s clients include Citizens Bank, PNC Bank, Fifth Third Bank, Bank of the West, and American Express, among others.

The acquisition complements Amount’s consumer banking solutions with Linear’s technology for the commercial segment. Banks that the two companies work with were consistently looking to solve more of the problems they had with their digital transformation and technology stack, which spurred this idea of unifying their forces.

Banks have been struggling with the transition towards digital as their infrastructure was created around products from decades ago, and have been heavily customized and modified over time. Their systems tend to be rather inflexible, and integration points are hard to rip out – the exact opposite of the architecture that operates at modern institutions that are open and API based, Amount’s CEO Adam Hughes told Tearsheet.

“Banking in particular is often not given the credit for how really complex it is. I think that complexity comes with lots and lots of discrete processes and systems that need to be employed to conduct the business of a bank. Change is hard for these institutions,” added Sam Graziano, CEO of Linear.

This surfaced an opportunity for the duo to combine forces to strengthen the team and add a new product line, as well as an attractive list of customers in order to supply more technology solutions to these banks.

The partnership will pair Amount’s consumer banking solution and buy now, pay later technology with Linear’s small business banking solutions to help financial institutions simplify and streamline business processes, said Hughes.

Their services will give banks the ability to move faster, be more agile, but also benefit from a lot of the know-how that Amount and Linear have, as both companies grew out of digital lending companies.

The collaboration may work because the foundational items necessary for success in SMB lending are akin to those in consumer lending - namely modern digital customer experiences, data aggregation, process automation and risk-based analytics. But while the methods used for acquiring customers sound extremely similar, the products and underwriting customers, both from a fraud and credit risk perspective, are quite different, according to Graziano. 

Plus, both Amount and Linear were reporting up to the same departments inside of banking institutions. Now they can approach clients together and offer solutions for more pain points by using just one provider. 

This type of a technology stack is becoming increasingly important in banking. Competition is heating up in financial services, with fintechs gaining market share thanks to the rise of banking as a service -- allowing them to focus more on new consumer demands. 

“There’s also a fundamental demand from consumers and businesses to interact with products and services that feel modern. If they don’t, customers will not want to use it. This forced banks to operate accordingly. And the pandemic fast-forwarded this process,” Graziano said.

Moreover, a big part of Amount’s business that emerged during the pandemic was its BNPL product. This allows banks to compete with companies like Affirm and Klarna, who are offering this checkout financing in an extremely modern way through merchant relationships direct to consumers, added Hughes.

For example, Barclays announced last year that Amount would be powering its BNPL offering, becoming one of the first major U.S. banks to offer point-of-sale financing installment options. 

Amount also announced a partnership with Marqeta to launch the first virtual card and loan origination partnership to help banks enter the BNPL space. 

Post transaction, Linear will rebrand and operate as Amount Small Business in 2022, headed by Sam Graziano, CEO of Linear, who will join Amount’s executive team. Amount’s headcount will total nearly 600 employees, and will operate offices in New York City, NY; Reston, VA; Chicago, IL; and Los Angeles, CA.