In May, SoFi CEO Michael Cagney told TechCrunch the company would be applying for a bank charter “in the next month.” Well, it’s about a month later, and — surprise! — the company has actually done so.
On June 6, SoFi applied for a de novo (or “new”) bank charter, according to a filing notice on the FDIC website. There will be an open comment period on the application for the next month, which will close July 6. The company confirmed it submitted the application, which TechCrunch has received a copy of.
The company is applying for an industrial loan charter under the name SoFi Bank in Utah, listing a Salt Lake City location as its proposed depositary address. However, the company makes clear in the application that SoFi Bank will operate as an online-only institution, with no branches or deposit-taking ATMs.
According to the filing, SoFi Bank is applying “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.”
As it notes in the filing:
The bank will primarily, although not exclusively, offer its accounts and other products and services to SoFi members, which make up borrowers and investors on the SoFi platform. 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. Accordingly, the bank would be pro-competitive and pro-consumer.
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. The bank will be run in a conservative fashion that will protect SoFi members, the bank and the FDIC in the most severe market environment.
For SoFi, it makes sense to add banking services like deposits, checking and savings accounts to its existing loan and wealth management products. While the company started out offering student loan financing to so-called HENRYs (high earners, not rich yet), it’s been gradually expanding its product offerings to claw deeper into customers’ financial lives.
Still, the company has a long way to go if it’s actually going to become a bank, and it’s facing an uphill battle. That’s because there haven’t been any new industrial loan company (ILC) charters approved in about a decade.
SoFi believes it has the necessary pieces in place to buck that trend. It is well-capitalized, with $1.9 billion raised since being founded in 2011. It’s profitable, at least according to SoFi CEO Cagney. And it recently acquired online banking startup Zenbanx, which Cagney told us last month will provide it the tech stack necessary to run banking operations, thus de-risking the SoFi Bank application.
More importantly, though, the Zenbanx acquisition brought former ING Direct founder, chairman, president and CEO Arkadi Kuhlmann onto its team. According to the FDIC application, Kuhlmann will serve as chairman and CEO of SoFi Bank, which will be a wholly owned subsidiary of the SoFi holding company.
Other proposed members of the SoFi Bank board include Cagney; Luther Helms, who would serve as Chair of Governance Committee; David Kirchheimer, Chair of Audit Committee; and Carl Snyder. SoFi CRO Tom Hugh is also listed as a proposed member of the SoFi Bank executive team.
In its application, SoFi says it will invest $4 million to fund bank organization expenses and $166 million to capitalize the bank in its first year of operations, which it believes will be sufficient to meet regulatory capital requirements. It will also contribute the assets it acquired from Zenbanx to the bank’s operations, according to the application.