First Republic Bank has laid its claim to Gradifi, to a small tech startup company based out of Boston, Massachusetts. No financial details were listed with the transaction or released to the public. The startup was two years old and is now a part of First Republic Bank, one of several potential buyers over the past year. The name of the startup, Gradifi, is here to stay for a while as well as its CEO, Tim DeMello.
The acquisition of Gradifi by First Republic is not surprising since both companies are directly related. First Republic is a bank based on the west coast that provides financial services to employees such as bank accounts, loans for students, personal loans, loan consolidation, and other forms of credit. Gradifi specializes in pushing student loan benefits to greater popularity by providing a software system to implement the benefit. Both are invested in the financial industry with similar interests.
During its expansion into Massachusetts, First Republic Bank has more than tripled its holdings in the state, and the acquisition of Gradifi happens to be a byproduct of this growth. When asked about the decision to sell, CEO DeMello commented on acquiring a stronger “financial backing” to improve overall services and customer satisfaction.
First Republic clearly has plans to expand Gradifi’s services across the country. Several new offices in New York, Los Angeles, and other major population centers. With some good spirited speculation, Gradifi seems slated to bring in plenty of big name clients across the country; for instance, before the acquisition, Gradifi managed to sign on customers such as Natixis Global Asset management, Penguin House, and First Republic Bank.
At any rate, this acquisition is sure to help expedite the spread of employer student loan benefits. The investment and support of First Republic Bank will certainly expand the service immensely as more companies begin to hop on the bandwagon. It will be interesting to see what sort of conversion rate the First Republic – Gradifi combination generates.
The employer student loan benefit is definitely gaining in popularity. Several studies point towards limited workplace productivity when employees have high levels of student loan debt. These same studies also pointed out that employees would gladly accept an employer benefit to help pay for student loans. Many different companies have taken this into account by offering their own student loan benefits. Monthly benefits are typically valued at $100-$200, but this benefit is still taxed by the government thereby limiting its effectiveness.
Student loan benefits are still in the works. They are taxed and still not offered by the majority of companies, but the offerings are growing in number every year. The student loan debt toll drops jaws and warrants plenty of second glances. With that in mind, it makes sense that employers would begin to adapt to the situation. It just so happens that this adaptation is Gradifi’s (and now First Republic’s) specialty.