Xactus turns a rival's tool into its own fintech bet

Xactus bought a platform used by its competitors and turned it into a new subsidiary and company leaders say the deal is less about market share than where fintech is heading.

The purchase of Mortgage Credit Link, the web-based order fulfillment platform serving consumer reporting agencies, by Xactus' parent company brought with it a range of questions among the former's staff and customers, some of whom are direct competitors. Xactus leaders immediately went to work addressing concerns and said the future direction of its new unit will involve input from all parties. 

"They want to see the roadmap; that was the question I got the most," said Xactus President Shelley Leonard, referring to longtime MCL clients. "My canned response was, 'I don't know yet. I need you to help me figure that out.'"

With the acquisition, Xactus rebranded the former MeridianLink unit to XedaLink, transitioning thirteen of the employees to the new subsidiary. While Xactus provides a range of mortgage-related services, its dual role as a consumer reporting agency and a software technology firm able to provide the same type of data as MCL had now means some CRA competitors and resellers have become customers, albeit on a different tool.    

"We understand that they could be concerned. We are confident in our ability to serve them as customers, while continuing to operate Xactus as a competing business separate and distinct from XedaLink, which is why we renamed it," Leonard said. 

The consumer reporting agency community is tight-knit, with many long-standing relationships that go back decades, which meant Xactus had to make its intent clear from the start, she continued.

"What I heard repeatedly is 'I appreciate the approach. We understand the approach. It's going to take time for us to trust the approach.' Which is fair," she added. 

Among XedaLink's first priorities is to assure customers a smooth transition, with no changes planned for existing agreements. Xactus plans for XedaLink to operate as a separate standalone subsidiary, with guardrails in place to wall off its customers' data from the Xactus platform, a move other acquiring businesses have prioritized in the recent wave of mortgage consolidation. 

"Our number one goal is to work towards no disruption. As a part of the acquisition, those contracts were assigned to this new entity, so we don't anticipate there being any heavy lift," Leonard said.  

Financial terms of the agreement were not disclosed, and no regulatory or antitrust reviews were required.

Leonard also pointed to Xactus' previous acquisition of SharperLending in 2021, a subsidiary that also serves CRAs, as proof such business models work. 

"We've been very successful in keeping it separate and distinct and walled off to ensure confidentiality with those clients and their data."

XedaLink serving bigger technology goals

With technology a key incentive for many companies in acquisition activity over the past two years, the MeridianLink deal can be seen in the same light, its president said.

Xactus understood what the MCL platform offered as a prior user before it eventually moved all of its business onto its own proprietary software.

"Xactus has over the last five years really moved from what I would have defined as a technology-enabled services business to a true fintech. This acquisition is more aligned to our fintech strategy, if you think about it that way, than maybe our historical verification strategy."

As its tenth merger deal, the XedaLink addition represented a "pure technology acquisition" in an adjacent space to its core business and offers clues to where Xactus sees financial services heading.  

"You could expect Xactus to continue to be acquisitive, not as much focused on market-share acquisitions, but more on technology and capability," Leonard said.