Online Lender SoFi Plans to Compete Directly With Traditional Banks

SoFi’s CFO and president Nino Fanlo (left) with co-founder and CEO Mike Cagney.
CREDIT: Courtesy Company

Like rebellious teenagers raging against their boring old parents, financial startups established themselves by being younger, cooler, and more tech-savvy than traditional banks.

But now that they’ve grown up a little, these fintech startups want to be just like staid old Mom and Dad.

Take SoFi , the online lender that began life offering to refinance Millennials’ grad-school loans. The San Francisco-based startup had an unquestionably breakout 2016, despite the funding crunch and bad press that dogged the entire fintech industry this year in the wake of Lending Club’s leadership scandal .

SoFi co-founder and CEO Mike Cagney avoided the worst of his rivals’ problems, while spending heavily on mainstream marketing, including an aggressive Super Bowl commercial, and product expansion. Some 200,000 customers now go to SoFi for student loans, personal loans, mortgages, wealth management advice, life insurance–or potential dates with other indebted Millennials.

Now Cagney is taking another run at the most boring, and most essential, of financial products: the deposit account where you put your paycheck and from which you ultimately pay all of your bills.

“We feel very confident that in 2017 you’ll be able to have a Sofi bank account … with a debit and/or credit card,” Cagney said in an interview Monday.

He was less specific about exactly how SoFi will offer those products, except to say that the company is working on “two or three initiatives right now.”

This has been a bit of a moving target for his company, which does not have a traditional bank license. As recently as late July, Cagney was telling investors that getting one is “not a viable solution for us.”

But earlier this month, the Office of the Comptroller of the Currency said it would start giving banking charters to online lenders and other financial technology firms. Cagney called it “a big step forward,” that will introduce a lot of consistency” to the financial tech industry and the regulations thereof.

Meanwhile, President-Elect Donald Trump has continued his vague-but-deregulatory policy promises, which Cagney sees as potentially helpful to SoFi and other financial startups.

“There are different paths we can take without becoming a formal bank,” Cagney says. “Some of the changes in the regulatory environment are opening up windows for us, and some of the structures within the current regulatory environment are paths, and then there’s partnering paths.”

Cagney dismissed Trump’s promise to repeal the Dodd-Frank financial reform law. “I don’t think you can fully repeal it, though I think there are elements that can be relaxed or rolled back,” he says.

The SoFi CEO is, however, watching Trump’s appointments. While “it’s tough to say whether it will make it easier or harder” to continue with SoFi’s bank-account strategy, Cagney has “no doubt with the new administration coming in, a lot of the folks in agencies that directly affect us, like the CFPB [Consumer Financial Protection Bureau], the FDIC [Federal Deposit Insurance Corporation], the FHFA [Federal Housing Finance Agency], there will be some changes in personnel,” he says. “I think we’re optimistic that it will be neutral to favorable in what we want to do in our business.”

Maria Aspan, “Online Lender SoFi Plans to Compete Directly With Traditional Banks”, December 19, 2016. Accessed via: