By September 2012, SoFi was reported to have commit over $ 200m in loans
๐ This increased to $ 450m by April 2014 and its borrowers reportedly got on average $ 9,400 in savings by refinancing their loan
https://t.co/ooW8URzu3L
๐ธ Today, SoFi wants to help its customers with every โfinancialโ step of their journey, providing:
ยท Student loans
ยท Medical loans
ยท Home loans
ยท Renters insurance (powered by $LMND)
ยท ETFs
ยท Stocks & cryptos
ยท Credit card
ยท Auto insurance (powered by $ROOT)
& more!
โฑ It has also understood that time-pressed and convenience-seeking young professionals value the following elements:
ยท Speed
ยท Choice
ยท Content
ยท Education
And $SOFI thus turned itself into a convenient, affordable, transparent and user-friendly financial platform
This means that SoFiโs wants to be a โone-stop-shopโ for its users
๐ธ Enabling it to cross-sell its different products and reduce its Customer Acquisition Cost
$SOFI is betting that it can replicate $AMZN, $FB and $UBERโs successes in their industry
๐ฆ And become the leading FinTech
โwhere three to five FinTech companies will emerge as leaders, and one will emerge as a Winner Takes Most, and we believe that will be SoFi.โ
๐ฅ This claim rests on the observation that around 250m banking account are held by the more than 4,700 Tier-2 banks in the U.S.
๐ฆ And around 40% of Americans use more than one bank account as their primary bank doesnโt offer fully integrated services
$SOFI therefor bets that it can attract these customers with its modern and fully-integrated digital banking experience
This strategy is supported by a tool $SOFI acquired in April 2020 for $ 1.2B:
โ๏ธ GALILEO
https://t.co/xvQvQYEsdS
๐ญ Galileo is the engine behind Robinhood, Revolut, Monzo, Chime, TransferWise
โWith our APIs our clients can create and manage accounts, authorize payments, manage card balances and get fraud protection. We manage the entire back end, [โฆ]โ
Galileo is central in powering SoFiโs growth, profitability and long term competitive position
โก๏ธ SoFiโs unit economics will be hard to beat by companies that compete with SoFi but are also SUPPLIED by it
$SOFI will then be the "AWS of FinTech"
๐ฌ Here are some of #SoFiโs CEO remarks in a discussion wtih Chamath Palihapitiya
โThe addition of Galileoโs technology platform allows us to vertically integrate our financial servicesโ
โ[โฆ] so that we can achieve superior economics in these products as wellโ
โWe believe our vertical integration of tech and operations, via our lending stack, and now the Galileo technology platform,โ
โcoupled with the revenue and marketing efficiencies of cross-buying, will drive attractive unit economics that will be hard to beat.โ
Great! How is the market doing?
๐ According to ReportLinker, the global market for Digital Banking is set to reach $ 22.3B by 2025
๐ Driven by the growing base of internet users, increasing smartphone penetration, customer appetite for convenience and bankโs need to cut costs
โAt the same time, intense pressure on banking firms to minimize operating costs in order to stay competitive is also having a major bearing on uptake of digital banking solutionsโ
https://t.co/Yj2jr80Z6N
๐ According to Mordor Intelligence, the Digital Lending Market is set to reach $ 587B by 2026, up from $ 311B in 2020
๐ For a CAGR of 11.9% and driven by the growing smartphone penetration, the need to digitise across the industry to cut costs
https://t.co/Y45GoHX0Kj
SoFiโs management is TIER-1
๐ธ Anthony Noto (CEO), Chris Lapointe (CFO) and Michelle Gill (GBL) are Goldman Sachs alumni
๐ป Assaf Ronen (HoE), Clay Wilkes (co-Founder Galileo) and Lauren Webb (CMO) have worked at Amazon, Microsoft, Intuit, Galileo
๐ธ Financial Check ๐ธ
๐ Net revenue reached $ 451m in 2019, up 87% YoY
ยท Sales are expected to reach $ 621m in 2020, up 38% YoY
๐ Ajd. EBITDA came in at a loss of $ 149m in 2019
ยท Adj. EBITDA loss is expected to contract to $ 66m in 2020
๐ THE BOTTOM LINE ๐
โ
SoFi aims to take advantage of the fragmented TIER-2 banking market by stealing customers with its easy to use and intuitive โone-stop-shopโ offering
โ
This โone-stop-shopโ strategy enables it to reduce customer acquisitions costs by cross-selling products and offering a central touch points for users
โ
Driven by the need for cost optimisation, banks have no other opportunity than to propose digital tools to their clients
โ
With Galileo, SoFi is ideally placed to take advantage of the rise of digital โNeoBanksโ but also of the TIER-2 banks modernisation effort
โ
In the long term, SoFi is set to become hard to compete with as it has a lower CAC than its competitors, and supplies its competitors
๐ฉ Banks may be driven to develop their own backend in order to avoid โriskyโ competition from SoFi
๐ฉ SoFiโs sales slowed down in 2020 but projects an acceleration going into 2021
๐ฅ We have a starter stake in $IPOE (SoFi) ๐ฅ
Disclaimer - This is not investment advice in any form and investors are responsible for conducting their own research before investing.
Sources
โ Investor presentation
โ Company website
โ Valuates
โ Forbes
โ Mordor Intelligence
โ ReportLinker
โ TechCrunch
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