SoFi mov­ing into tra­di­tional bank­ing

The ‘fin­tech’ start-up ap­plies for fed­eral de­posit in­sur­ance.

Los Angeles Times - - COMPANY TOWN -

On­line lender and fi­nan­cial start-up SoFi has taken the first step to­ward com­pet­ing with the na­tion’s big­gest banks on their home turf: the check­ing ac­count.

Last week, the San Fran­cisco provider of stu­dent and per­sonal loans sub­mit­ted an ap­pli­ca­tion for fed­eral de­posit in­sur­ance, a pro­tec­tion nor­mally avail­able only to con­ven­tional banks. In its ap­pli­ca­tion, the com­pany said its SoFi Bank sub­sidiary will of­fer bread-and-but­ter bank­ing prod­ucts, in­clud­ing check­ing ac­counts, debit cards and even­tu­ally credit cards.

SoFi is one of a wave of new fi­nan­cial-tech­nol­ogy, or “fin­tech,” start-ups that aim to reengi­neer the way that Amer­i­cans man­age their sav­ings, take out loans and pay for things.

The com­pany, whose name comes from the moniker So­cial Fi­nance, was founded in 2011 with a fo­cus on re­fi­nanc­ing stu­dent loans. The com­pany quickly branched into other prod­ucts aimed pri­mar­ily at mil­len­ni­als, in­clud­ing per­sonal loans, mort­gages, wealth man­age­ment and, re­cently, in­sur­ance.

Un­like other fin­techs such as Pros­per and Lend­ing Club, SoFi funds all of its loans from its own cap­i­tal. That en­ables it to make loans more quickly and some­times at lower rates than its com­peti­tors.

Al­though it’s branch­ing into other prod­ucts, SoFi con­tin­ues to mar­ket it­self pri­mar­ily to younger col­lege grad­u­ates with lu­cra­tive jobs, of­ten in ma­jor metropoli­tan ar­eas. The com­pany aims to make its clients feel like mem­bers of an ex­clu­sive club, hold­ing networking events for them in lo­cales such as San Fran­cisco and New York and re­fer­ring to them as part of the SoFi “com­mu­nity.”

But no one should ex­pect to see a SoFi branch in their neigh­bor­hood any time soon. In its ap­pli­ca­tion, SoFi said it be­lieves that its alldig­i­tal ap­proach — mean­ing no phys­i­cal branches — will bet­ter serve cus­tomers, par­tic­u­larly those who find vis­its to tra­di­tional bank of­fices un­nec­es­sary.

The com­pany, how­ever, will have back-of­fice op­er­a­tions in both Delaware and Utah. Like other Sil­i­con Val­ley fin­techs, SoFi has taken ad­van­tage of bank­ing laws unique to Utah that al­low non­bank com­pa­nies to set up bank­ing op­er­a­tions un­der what’s known as an in­dus­trial bank char­ter.

In its ap­pli­ca­tion to the Fed­eral De­posit In­sur­ance Corp., SoFi plans to fund its new bank sub­sidiary with $166 mil­lion in cap­i­tal. SoFi raised money from in­vestors ear­lier this year, in­clud­ing Ja­panese com­pany Soft­bank and ven­ture cap­i­tal firm Sil­ver Lake.

SoFi’s ap­pli­ca­tion car­ries sym­bolic value as well. Since the fi­nan­cial cri­sis last decade, only a hand­ful of new banks have arisen. And no in­sti­tu­tion has ap­plied for cov­er­age from the FDIC un­der Utah’s in­dus­trial bank laws in 10 years.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.