SoFi’s highly anticipated IPO was recently completed via a merger with Chamath Palihapitiya’s SPAC Social Capital Hedosophia Holdings. The success of the transaction underscores SoFi’s rise to success since its inception, as well CEO Anthony Noto’s experience leading similar deals.
Above all, the key ingredient to SoFi’s product strategy has been becoming a one-stop-shop for all things financing in the eyes of its customers. This is a reputation that the fintech loyally serves, improving its product profile to better meet its recognition. Since beginning as a student loan refinancing service aimed at millennials, SoFi has widened its offerings to cater to loans, home loans, auto loan financing, and credit cards. Today the company proudly boasts over 2 million members including and outside of its initial target demographic of millennials.
Sofi’s popularity can be attributed to the adaptability of its business model, ensuring that products are expanded upon to meet the need of today’s banking consumer, but also in its clever cross-selling strategy. According to SoFi, 24% of its sales come from cross-purchase activities (these are purchases where consumers pay for multiple unrelated products from the same company). In terms of scalability, this offers returns via lower attendant acquisition costs. SoFi shared that 775,000 of their 2 million members are “multi product” members which is almost half of their customer base - a fairly high metric for loyalty and service satisfaction.
The fintech has been open about its digital-first strategy, and the varied strategies the company executes to encourage and incentivize customers to stay within its platform for all their financial products. Credit card holders stand to gain double points with SoFi’s card and points are also offered as rewards to customers who frequently check the app or read articles within it. This scheme, paired with the broad suite of differentiated products is heightened by SoFi’s perpetual need, as a company, to create links between offerings to better serve its customers. It is a holistic approach to banking that considers a consumer’s entire possible repertoire of needs and seeks to provide accessible solutions to those ends.
The success of SoFi’s model is a lesson for challenger banks seeking to gain market share in the space especially as Generation Z consumers reach peak earning power, a time in which digital banking is expected to become the norm.