SoFi IPO Underscores The Rise Of The Purpose-Built Bank

digital banking

With Wall Street’s newest FinTech darling, SoFi, trading higher and presumably off to greener pastures following its initial public offering (IPO), investor appetite clearly remains strong for anything that can digitally disrupt the financial services space.

Beyond this latest listing, digital banks that cater to — or focus on — certain demographics or services are gaining currency not just on the Street, but on Main Street, too.

As noted in this space earlier in the year, SoFi has been expanding, having acquired payments firm Galileo, while also branching out internationally through its purchase of 8 Securities in Hong Kong. The company also bought community bank Golden Pacific for $22.3 million in early March.

One Stop Shops 

The company originally traces its genesis and focus back a decade to student loan refinancing (targeting millennials). But since then SoFi has branched out to a broader range of offerings, spanning home loans, credit cards, auto loan financing, etc. The company has billed itself as a “one stop shop” for finances across more than 2 million members. The company maintains, in investment materials, that it had nearly doubled its “multi product” members to more than 775,000.  In an example of cross-selling activity, the company has said that 24 percent of product sales come from cross-buy activities, which of course has a lower attendant acquisition cost.

In the S-4 filing with the SEC, and in evidence of the digital-first strategy, the company stated that “through SoFi Money, a digital, mobile cash management experience for our members, we invest in member acquisition and marketing activities to attract new members, including by offering rewards to incentivize prospective members to house their cash management activities on the SoFi platform.”

Beyond SoFi, of course, there are other examples of the digital bank/targeted financial platform. LendingClub, in just one illustration, has been pursuing an “outcomes based approach” as a means toward improving consumers’ financial health. For financial services providers, CEO Scott Sanborn told Karen Webster, “the biggest thing they have to do is move organizationally to a ‘customer-first’ mindset powered by a single view of the customer.”

Holistic Views 

That holistic view is informed by data and digital channels. LendingClub, he said, has been branching beyond credit and lending toward saving and reaching out to younger consumers who need guidance along their respective journeys.

To be sure, as time goes on, and younger consumers come more fully into peak earnings power, digital banking will continue to become the norm. As noted in the most recent Digital Onboarding Tracker, a significant number of Generation Z consumers — 37.5 percent — said they would prefer to use digital-only banks for their financial needs. Seamless and secure onboarding is a key demand as these younger users venture out into the digital age.