SoFi applies to open a national bank
Social Finance is the latest fintech to seek entry into the banking establishment after submitting an application to open a national bank.
SoFi filed a de novo bank application Wednesday with the Office of the Comptroller of the Currency, according to a company spokesperson. The move comes close to three years after the San Francisco company pulled the plug on an earlier attempt to open an industrial bank.
SoFi, which was one of the first fintechs to achieve a $1 billion-plus valuation, currently offers student loans, mortgages, personal loans, investment services and a cash management account. CEO Anthony Noto said in a written statement that a bank charter will allow SoFi to expand its menu of offerings.
“We firmly believe that by pursuing a national bank charter,” he said, “we will be able to help even more people get their money right with enhanced value and more products and services.”
One benefit of becoming a bank is that SoFi would be able to operate under a single set of regulatory standards, rather than the 50-state scheme that applies to nonbank lenders, which should result in cost savings.
A copy of SoFi’s charter application was not immediately available on Thursday.
But a source familiar with SoFi’s thinking said that the move should lower the firm’s cost of funds, which could level the playing field with traditional banks. This source also indicated that SoFi expects to be able to offer more product choices in the deposit realm.
SoFi applied to open an industrial bank back in 2017. That effort fell apart after former CEO Mike Cagney left the company amid a scandal involving sexual harassment allegations. The company did not comment Thursday on why it is now seeking to become a national bank, rather than an industrial bank.
At least four other fintechs have applied to open banks in recent years. Varo Money, which offers online consumer deposit accounts, has received approval for deposit insurance and conditional approval for a national bank charter.
A 2019 national bank application by Robin Hood, which offers commission-free investing on mobile phones, is still pending.
Square, an upstart payment processor that also offers financing to its small-business customers, is seeking to open an industrial bank. The Jack Dorsey-led company received conditional approval in March for its deposit insurance application.
Rakuten, which is sometimes described as the Amazon.com of Japan, is also seeking to open a U.S.-based industrial bank. Rakuten filed an application with the Federal Deposit Insurance Corp. in May after pulling the plug on an earlier effort.