“We’re winning share in deposits … and we’re taking it from the traditional banks,” SoFi CEO Anthony Noto said on a Tuesday (Nov. 1) earnings call.
On a day where earnings results cheered investors — who bid the stock up 18% at the open — SoFi’s numbers show that its “one-stop shop” approach to finance, to checking and personal loans, continue to gain traction.
As for the deposit activity: The company said deposits soared by 86%, to stand at $5 billion at the end of the quarter. As Noto said on the call, 85% of SoFi Money deposits are from direct deposit accounts. Half of the SoFi Money accounts set up during the quarter have direct deposit in place by day 30, management said on the call, up from 37% a year ago.
In part the appeal lies with the ability to offer higher APY than other players by virtue of its bank charter — the rate stood at 2.5% during the quarter, and that rate is now being boosted to 3% as soon as this week.
In evidence of the cross-pollination afforded by the platform, Noto pointed to the fact “there’s ample opportunity to cross-sell” and that the platform uses deposits to fund personal loans (with an attendant lower cost of funding), where originations increased 71% year on year to $2.8 billion. Investment in technology to automate and accelerate the application-to-approval process is paying off, management said; it used to take eight days to fund loans and now that timeframe has been shortened to two days.
Flexible Platform, Build for Endurance
The growth in lending, said Noto, “underscores the full suite” of products that SoFi offers, and which is flexible enough to “endure through market cycles.”
Management also noted that annual spend per member is up, as measured in the third quarter, by a 2x multiple from a year ago.
SoFi said in its materials that it grew total Financial Services products by approximately 2.7 million, or 83%, year-over-year in the third quarter of 2022, bringing the total to approximately 5.9 million.
The company’s earnings results showed that during the quarter, SoFi new member additions stood at about 424,000, and at the quarter’s end total members stood at 4.7 million, up 61% year on year. New product additions during the quarter were more than 635,000. Galileo accounts across the payment processing platform reached 124 million in the latest period, up from 89 million last year.
Noto and CFO Chris Lapointe stated on the call that credit quality remains strong: The median FICO score for new direct deposits opened in the quarter was 750. And Lapointe said that the profile of consumers taking out personal loans from SoFi is strong too, as the members have an average income of $160,000 and an average FICO score of 746. Charge offs are below pre-pandemic levels, according to investor call commentary, though management expects to see some normalization over time.
Looking ahead, management said on the call, the company will launch “pay in 4” options in the coming months, which should help satisfy demand for installment offerings, particularly from lower-income consumers.
“We’ll continue to be nimble in the marketplace,” said Noto.
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