Companies creating new credit card business options, especially digital alternatives, have proliferated over the past decade with a host of new entrants, including the fintechs X1, Marqeta and Tandym.

X1, which is not a bank, has raised $62 million in venture capital and has between 11 and 50 employees, according to the research site Crunchbase. It was co-founded by Rao and Batra in 2017, based on their LinkedIn profiles, which also shows they both worked for Twitter for about four years before starting X1.

Robinhood didn’t respond to a question regarding how many employees from X1 would be retained.

With the X1 acquisition, Robinhood is latching onto a new revenue stream. While X1 doesn’t charge annual or late fees, it does charge users interest on their balances, ranging from 19.99% to 29.99%, based on the user’s creditworthiness, according to the X1 website.

Robinhood won’t earn income from charging X1 cardholders fees, assuming it continues with the existing X1 business model, but it will also be able to generate revenue from charging merchants an interchange fee.  

Generally, X1 card users are able to redeem points earned using the company’s credit cards at X1 merchant partners, according to the card company’s website. Some cardholders who download the company’s app may also be able to redeem points for cash, on a basis of less than 1 cent per point, the website said.

By Lynne Marek on June 23, 2023
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