SoFi Re-Applies for a National Bank Charter
SoFi — short for “Social Finance” — is ready to become a bank. This week, the FinTech filed for a national bank charter with the Office of the Comptroller of the Currency (OCC). In their application, SoFi says having its own bank charter would help lower their funding costs by simplifying their business model. That said, some restructuring may be in order due to SoftBank’s large investment in the FinTech. The Wall Street Journal reports that SoFi has been discussing different options with SoftBank to bring their stake down below the threshold where additional oversight would be required.
This is actually the second time SoFi has applied for a bank charter. As Business Insider recalls, the company submitted an application for a bank license in Utah in June 2017. However, that application was later withdrawn when then-CEO Mike Cagney resigned along with other executives.
SoFi’s second stab at becoming a bank comes as another FinTech stands on the verge of obtaining its own charter. In February, Varo Money received FDIC approval for deposit insurance and the firm’s application had previously gained preliminary OCC approval back in September 2018. While final approval of Varo’s charter is still expected, it’s unclear when it will arrive.
In a letter sent to employees (obtained by BI), SoFi CEO Anthony Noto discussed the decision to apply for the charter, writing “We thought long and hard about embarking on this path, and are proud of what we have accomplished in the last 2+ years to position ourselves to take this next critical strategic step in our development.” Noto added, “We have the right infrastructure and the right capabilities in place to make this happen.”
Word of this bank charter application is only the latest development in what has proven to be a blockbuster year for SoFi. In April, the company not only announced that it would be acquiring Galileo Financial Technologies for $1.2 billion but also purchased Hong Kong-based investment platform 8 Securities, rebranding the service as “SoFi Hong Kong.” Then, the following month, they announced a new partnership with Samsung that will result in the creation of the Samsung Money by SoFi debit card product.
Considering that it’s taken Varo three years to get to where they are in the bank charter approval process, it could be a long while before SoFi sees much progress. At the same time, with some regulators warming to FinTechs overall, there may also be reason to believe that the company might have an easier time than some of those before them. In any case, it’s another big move for SoFi as the firm continues to grow.