Back in May, SoFi CEO Mike Cagney had told TechCrunch that the fintech company would be applying for a bank charter “in the next month.”
Roughly a month later, SoFi did exactly that. SoFi is applying for an industrial loan charter under the name SoFi Bank. The personal finance company has listed its proposed depositary address as a location in Salt Lake City, Utah.
For the next month, there will be an open comment period on the application, which will close July 6. SoFi has confirmed it submitted the application which TechCrunch received a copy of, but so far, there hasn’t been an official press release on SoFi’s website about the application.
SoFi has made it clear in the application from TechCrunch however, that SoFi Bank will only operate as an online institution. In other words, no branches or deposit-taking ATMs will be made available to consumers.
According to the filing, SoFi Bank is applying for the bank charter “for the purposes of providing its customers a FDIC insured NOW account and a credit card product. The bank will offer no other products and services.”
The filing notes the following: SoFi specializes in marketing financial products and services to people who prefer to access banking products and services over the Internet and other electronic systems, especially “Millennials”. There is a strong trend among this demographic to not utilize traditional banking channels such as branches and paper checks. SoFi has become a leading provider of financial services to these consumers and finds the lack of adequate options an opportunity to lead in offering the bank’s vital services as well….Ultimately, SoFi is pursuing the industrial bank charter to offer new and existing members the more complete product set that they seek. Such extension is natural to SoFi’s business and will deliver better product and services to existing and future SoFi members than are available in the market today.
SoFi originally got its start as a student loan refinancing company, but it has grown considerably since then. The fintech company now offers mortgages and personal loans while also expanding its financial services suite to include wealth management. With that in mind, it makes sense for SoFi to add more banking services like deposits, checking, and savings accounts.
However, SoFi should not grow overly optimistic as there have not been any new industrial loan company (ILC) charters approved in about a decade.
SoFi believes it has the proper mechanisms in place to get approved and break the trend. The company is extremely well-funded with $1.9 billion raised since its founding in 2011. And recently, SoFi raised $500 million in VC funding. Additionally, SoFi recently announced its expansion into the state of Delaware, intending to hire around 400 new employees.
Additionally, SoFi acquired online banking startup Zenbanx not too long ago. Zenbanx’s technology should seriously help SoFi run successful banking operations.
In the application, SoFi stated it will invest $4 million to fund bank organization expenses and $166 million to capitalize the bank in its first year of operations. Furthermore, the online personal company will contribute the assets it acquired from Zenbanx to its bank operations.
Author: Dave Rathmanner
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