Auto lender Ally acquires Fair Square for $750M

Fair Square Financial, seen here at their 2019 ribbon cutting in Wilmington, has been acquired by lending giant Ally. | PHOTO COURTESY OF GOVERNOR’S OFFICE

WILMINGTON – Fair Square Financial, one of Delaware’s fastest-growing financial services startups, was acquired Wednesday by the online auto lending giant Ally in a $750 million all-cash deal.

Founded five years ago by a handful of banking veterans from Bank of America, JPMorgan Chase, Capital One, Citigroup and elsewhere, Fair Square launched its sub- and near-prime credit card Ollo in 2017.

Led by CEO Rob Habgood, the startup quickly landed the support of notable investors, securing $200 million by financial services-focused private equity firm Pine Brook Road Partners and $100 million from investment firm The Orogen Group, led by former Citi CEO Vikram Pandit.

Pandit, along with former E*Trade CEO Steven Freiberg, would join Fair Square’s board of directors, providing valuable guidance and credibility to the startup.

The state of Delaware also aided Fair Square’s expansion with a $779,000 taxpayer-backed Strategic Fund grant in 2017 that supported its location of offices at the Brandywine Building in downtown Wilmington and hiring additional staff to manage its data analytics, data mining, marketing and credit underwriting. Today, Fair Square employs 86 people in Wilmington, managing about 693,000 cardholders with $816 million in loan balances.

“Fair Square was built on the premise of providing fair and transparent credit card offerings,” Habgood said in a statement. “We are excited to continue delivering compelling products with growing momentum as we join the Ally team.”

The growing firm is one of a handful of so-called fintech, or financial services technology, companies growing quietly in the greater Wilmington area. Marlette Funding, which operates the Best Egg consumer-lending platform, also expanded widely last year in Brandywine Hundred while others like Mercury Financial, which offers its own near-prime credit card, are growing at the Wilmington Riverfront.

For Detroit-based Ally, the Fair Square acquisition marks its second attempt to re-enter the credit card market after it terminated a $2.6 billion deal for the much larger CardWorks in 2020 amid the fallout of the pandemic. In 2019, it closed down its own proprietary cash-back card issued with TD Bank.

“The addition of Fair Square and its credit card offerings will enhance our suite of consumer products and aligns with our long-term strategy to be the leading full-service digital-bank,” Ally CEO Jeffrey Brown said in a statement.

Ollo – a name with no specific meaning but chosen for its easy-to-pronounce name – offers two different cards, one with no annual fee and one with unlimited cash back on purchases. It worked with Wilmington-based design firm Bounteous on the products, adding to its local commitment.

Like other near- or subprime credit lenders, Fair Square goes beyond traditional credit report metrics to identify good customers, including reviewing length of residencies, long-term credit history and other data to determine if they would reliably repay debts.

In 2020, it successfully securitized $300 million in credit card debts, with favorable ratings from credit rating agencies, showing that its modeling had produced reliable clients.