By: Jessica Duncan
Popular fintech SoFi gained a big boost when they received regulatory approval in January 2022 to become a national bank. SoFi was founded in 2011 with a core focus on loans but has progressively expanded their offerings to include cash management accounts and investments including cryptocurrency. SoFi states on their website to have currently helped over 3.5 million members. While they have had success in the marketplace, this transition to a regulated financial institution will open the door for SoFi to operate more efficiently and extend more attractive rates and banking experiences to current and prospective members.
What Matters to SoFi
One major advantage of the bank charter is the ability for SoFi to hold their own deposits, bringing with it the ability to leverage the deposits to fund loans. This opportunity drove the go-to-market strategy SoFi took after receiving their bank charter which was the launch of their new deposit product, named Checking and Savings. This was a unique tactic to position the two accounts together as one versus two standalone products. This move was likely strategic in order to keep the product similar to the current SoFi Money cash management account. It is important to SoFi to ensure strong retention and transfer of balances over to the new Checking and Savings account from existing SoFi Money members.
And, that’s right where SoFi started promoting the new product – to existing SoFi Money members. In email, they described the launch as an exclusive opportunity to be one of the first to access the benefits of the product. The value proposition centers around a 1.00% APY on account balances up to $50,000 in total. The sticky part is that direct deposit is required to earn the 1.00% APY, otherwise, members without direct deposit will earn 0.25% APY. This requirement also reflects the strategy used in their product design. SoFi wants to incent members to make this account their primary deposit relationship. This matters to SoFi since their often promoted mission is to be an all-in-one financial provider; becoming their members’ primary banking partner of choice is the launch pad for deeper engagement of services.
What Matters to Existing Members
The 1.00% APY is hard to overlook in today’s low-rate market, and SoFi is making sure to drive that message home. Displayed on their website and repeated throughout emails, they make the following statement that “With SoFi Checking and Savings, you can earn more interest in two weeks than you would in one year in a big bank’s checking or savings account!”
In addition to earning 1.00% APY, SoFi focused on other areas of importance for existing SoFi Money members. They used the tagline “Keep what you love, plus reap new benefits” when referring to current benefits like zero account fees, their Vaults saving feature, and two-day early paycheck access.
SoFi included videos within their marketing efforts to convey the ease and simplicity of the upgrade process. The video provides instructions on how to accept the upgrade, gives background on what the bank charter will mean for them, and reinforces that many of the account details, like their existing debit card will stay the same.
SoFi has had to talk about two benefit losses that will occur; the change to the standard $250K FDIC insurance coverage and potentially more impactful is the loss of ATM reimbursement fees at non-Allpoint ATMs. SoFi has reminded members throughout their communications that access to the Allpoint ATM network covers more than 55,000+ ATMs, insisting on their FAQs page that this is more than Chase, Wells Fargo, and Bank of America combined.
Other important lines of business to SoFi are their lending and investment members, and this was another early area of opportunity to promote the benefits of bringing their banking under the same roof.
To members with loans, they talk about the ability to earn more to pay down their loan faster. The advantage of making instant transfers to individual investment portfolios was a main selling feature used to encourage investment members to consider opening the Checking and Savings account.
Across all of the marketing offers observed being sent to existing members, the $100 incentive was tied to Direct Deposit. SoFi’s members now have a lot to consider. Will the combination of new perks and a quick cash bonus be enough to untangle themselves from another banking institution to go all-in with SoFi? Only time will tell.
What Matters to Prospective Members
Existing members have the advantage of being familiar with SoFi as a digital bank, plus a comfort level with their hybrid account style and ‘non-bank’ approach, but what about prospective customers? What will attract consumers to bank with SoFi who might not have considered them as an option before?
To entice a new customer, an incentive is almost a necessity and SoFi understood that requirement by offering up to $120 in cash bonuses for new Checking and Savings accountholders. Plus, we will see SoFi continue to rely on the strategy that has gotten them this far which is a straightforward, transparent approach to business and a commitment to not charge unnecessary fees.
But what about the lack of a physical branch? Has society moved on from needing that safety net with their primary banking partner? I think for the most part, yes. After banking primarily through digital channels over the past two years, consumers have a stronger confidence level with banking in an online-only environment.
Additionally, consumers that still prefer the traditional bank experience might not be the audience SoFi is looking to acquire. For instance, SoFi launched a Q1 2022 social media and sweepstakes campaign referred to as a breakup challenge, encouraging consumers to create a TikTok video publicly breaking up with bad banking and using the hashtag #SoFiBreakUpChallenge. SoFi’s marketing and product offering (capping the 1.00% APY at $50,000) lean towards capturing younger demographics or early savers/new investors who are looking to find a
convenient way to bank, save, and earn.
SoFi’s mobile app will be another key component to their value proposition and how they position themselves as a strong banking contender. They want to be a one-stop-shop for financial services. To fill this role, consumers expect to have a seamless view and integration of all aspects of their financial lives available through the mobile app. SoFi has already developed a cohesive, user-friendly platform, which likely gives the firm a boost a confidence as it enters this new era as SoFi Bank.