SoFi Stadium in Inglewood, Calif.
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SoFi takes a shortcut

Protocol Fintech

Hello and welcome to Protocol | Fintech! This Friday: why SoFi bought a bank, Chase Pay calls it quits and a Biden Treasury nominee gets a wary review.

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The Big Story

SoFi takes a shortcut

Square finally got its banking charter last week. SoFi couldn't wait that long.

The online lender got preliminary approval for a U.S. bank charter in October. But this week, it announced it would just buy a bank instead: Golden Pacific Bancorp, a community bank in California, for $22.3 million.

Clearly, SoFi wants to become a bank faster. The company says it is switching its application to become a new bank to "a change of control application" so it can simply take over an existing bank. The shift will probably work, experts say.

  • "Buying a bank (particularly with conditional approval secured) will likely get SoFi in the market a bit sooner than standing up a de novo bank," Michele Alt, partner and co-founder at Klaros Group, an investment and advisory firm, told Protocol.
  • The purchase makes the process "simpler procedurally" and "can shorten the regulatory review period significantly," Alt added.
  • With a bank, SoFi can set its own interest rate on its savings accounts. SoFi started out with student loans, but a bank will let it tie together its growing range of lending, savings, checking, insurance and investing products. Like Square with its Cash App and others, SoFi wants to be the main finance app for consumers.

Buying a bank can be tricky. There's finding the target bank, going through due diligence and securing regulatory approvals, all of which takes time. LendingClub's deal to buy Radius Bancorp took nearly a year to close. (Don't forget SoFi is in the middle of its own deal to merge with a Chamath Palihapitiya-backed SPAC to go public.)

  • "An acquirer, particularly a fintech company, may find itself with business lines it is not interested in, clunky legacy systems and processes, and human resources that may not fit with the fintech's culture," Alt said.
  • "We are thrilled to be acquiring Golden Pacific Bank to accelerate our pursuit of a national bank charter," SoFi CEO Anthony Noto said in a tweet. (Yes, a tweeting banker: Noto was previously Twitter's COO.) "We will remain 100% digital; no plans to open branches." Golden Pacific's three Northern California branches will stay open, operated by a subsidiary.

The deal also gives SoFi a chance to flex its growing tech arsenal, particularly Galileo, the payments software company it acquired last year for $1.2 billion.

  • The Golden Pacific deal gives SoFi "an entry point for their Galileo division," which mostly serves payment startups and challenger banks, to court community banks, Peter Renton, chairman of LendIt Fintech, wrote. Noto also mentioned this sales opportunity.

Bottom line: SoFi's shortcut seems smart. Logan Allin, managing general partner and founder of Fin Venture Capital, called the purchase a "huge opportunity for SoFi."

  • It highlights why neobanks and online lenders see the benefits of "becoming a fully vertically integrated FDIC-insured and regulated bank," which could make it possible to reduce their cost of capital, boost their returns and find more customers, he told Protocol.
  • Stephen Sikes, chief operating officer of Public and a former SoFi executive, praised his former colleagues. "Step by step, they're making the right decisions" to build "the bank of the future," he told Protocol.
Now it's up to the regulators. SoFi noted the deal is subject to approvals by the OCC and the Federal Reserve.



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  • "As digital banks continue to rise, we are also seeing more brick-and-mortar branches close their doors forever. This is not a new trend in the world of finance; however, the COVID-19 crisis crystallized thinking on this matter."Dmitry Dolgorukov, founder of HES Fintech, on the rapid growth of digital banking.
  • "Unless you are a crypto evangelist, pretty much the only reason you might choose to use cryptocurrency as a means of payment is when you wish to remain anonymous (or at least pseudonymous) — for instance when you are buying illegal things (e.g. drugs) or embarrassing things (e.g. porn) or when you are extorting money illegally from others (e.g. through ransomware attacks)." —Financial Times columnist Jemima Kelly on the future of cryptocurrency.
  • "I'm sure the banks would prefer someone much more sympathetic to them, but given the menu of options in a Democratic administration, I suspect they'd be happy to have her." —David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, on Nellie Liang, President Biden's nominee for treasury undersecretary for domestic finance.

Three Questions With

Atif Siddiqi, Branch CEO

What is the trend in fintech that is most exciting for you?

I would say embedded finance, being able to take part of our application and being able to plug it in a very frictionless way to another application. We're really excited about that and what it unlocks. It allows non-traditional payments companies to add payments capabilities easily.

What is the trend you find most troubling?

I always go back to fees increasing on the consumer. We're very consumer-focused and doing what's right for the consumer. Larger institutions are just being able to figure out ways to charge consumers additional money. If you just look at ATMs and overdrafts over the last two years, it becomes expensive to be in this lower-to-moderate income demographic over time.

What needs to be fixed sooner than later?

We are believers in this open-banking concept and the users being the owner of their data and making that data portable. The incumbents might be trying to still hold on to that. But fundamentally, we feel like it's the users' data and they should be able to take it anywhere to provide them the best experience and service they need.

Need to Know

  • Mastercard joined forces with Payoneer. The corporate giant has formed a partnership with the digital payments company to offer a digital payments card that will allow small businesses to make global purchases.
  • Chase Pay digital wallet is folding. JPMorgan Chase said it will no longer make the digital payment service available through merchant apps and websites.
  • Corvus Insurance raised $100 million. The series C round led by Insight Partners boosted the commercial insurance provider's valuation to $750 million. The company uses AI to predict and prevent insurance-related loss.
  • FalconX raised $50 million. The crypto financial services company said the investment is from Tiger Global and B Capital Group, along with existing investors including Accel, Accomplice VC and American Express Ventures.
  • BlockFi raised $350 million. The series D round led by Bain Capital valued the financial services company geared to crypto market investors at $3 billion.
  • Symbo Platform Holdings raised $9.4 million. The Singapore-based insurance startup's series A round was led by CreditEaseFintech and Think Investments. Symbo is looking to expand in Singapore, Malaysia and Indonesia.
  • Capital One Ventures invested $24 million in Securonix. The financial services giant will work with the cloud security and intelligence company in developing new tools to monitor and defend against cyberattacks and other security threats.
  • Former Coinbase U.K. CEO joined MoonPay. Industry veteran Zeeshan Feroz was named chief growth officer of the crypto payments infrastructure company.

Thanks for reading — see you Tuesday.

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