SoFi Submits Second Application for Banking License
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SoFi Submits Second Application for Banking License

The second time could be different — for a few reasons

SoFi, Social Finance, Inc., is not satisfied with its role of being a mere FinTech platform providing personal loans, student debt refinancing, mortgages, and investing. SoFi sees its growth in becoming a true bank, which is why this major FinTech disruptor recently re-applied for a de novo bank license.

SoFi Applies for Banking License

We previously addressed the FinTech’s precarious positioning between the banking infrastructure and TechFin. Although FinTech provides value to customers which wouldn’t have existed otherwise, FinTech companies must rely on banks to plug into the flow of money.

On one hand, this leaves FinTech companies free to focus exclusively on their services without worrying about complying with strict regulations that banks have to tackle. However, when your own core business model is adjacent to banking services, which is the case with SoFi, being reliant on a mediator such as banks becomes an obstacle for its growth.

And SoFi has seen quite a bit of growth. It recently acquired Galileo in a deal worth $1.2 billion.

SoFi’s previous CEO, Mike Cagney, initially applied for a banking license in 2017 in Utah. He was forced to resign amid sexual harassment claims submitted by former SoFi employees. Now, under the guidance of its current CEO Anthony Noto, who was a Twitter COO, SoFi is re-applying for a de novo banking license to the Office of the Comptroller of the Currency (OCC).

It’s investing arm, SoFi Invest, has experienced notable success. It features automated investing, cryptocurrency trading, long-term financial planning, and more. SoFi now wants to extend this success to

How Will a Banking License Benefit SoFi?

SoFi, which is currently valued at $4.8 billion, handles $45 billion worth of loans for its one million members. It therefore clearly needs to operate under a unified regulatory framework.

As a FinTech company, it has to abide by each state’s specific rules. As a bank, SoFi would have to comply with a single federal ruleset.

Moreover, as a de novo bank, meaning a bank that is not acquired through purchase but newly charted, would enable SoFi to receive insured deposits from clients. SoFi’s CEO Anthony Noto sees this first step into becoming a bank as a critical phase in expanding their operations and services for their customers:

“We firmly believe that by pursuing a national bank charter, we will be able to help even more people get their money right with enhanced value and more products and services.”

Looking at SoFi’s portfolio of services and its current enviable No.8 rank on CNBC’s disruptor list, this is a natural evolution of the company. If successful, this would also allow SoFi to receive deposits and issue loans independent of its current partnership with banks. No doubt, the end-user would benefit greatly from higher interest rates and better refinancing models as a result of increased competition.

If approved by the OCC, SoFi’s request would then have to be reviewed and approved by the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve. Curiously, harassment accusations directed at Mike Cagney were sufficient to withdraw the first request for a banking license in 2017. Hopefully, three years of setting up a new work environment were enough to avoid any such distractions this time around.

Non-established banks have to overcome severe psychological barriers present in the mind of an average customer. Would you pick SoFi as your go-to student loan refinancing company if it were to become a bank? Let us know in the comments below.

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