The Greatest Thing to Happen to Banking Isn’t A Bank At All

A few weeks ago, a small SoFi team hit the streets of Oakland, CA to ask people how they feel about their banks. You can probably imagine the responses:

“I don’t think my bank cares much about me.”

“I’ve never recommended my bank to anyone.”

“I don’t really trust banking institutions in general.”

It’s hardly surprising. Beating up on banks has become a national pastime in the wake of the 2008 financial crisis and the events of the “too big to fail” era. What is surprising is that we’re all willing to put up with it — the nickel-and-dime fees, the bad customer service, the being treated like a number. Most of us don’t even switch banks when we get fed up — it’s too much hassle, and aren’t they all kind of the same anyway?

For decades, banks, have been complacent in their “too big to be challenged” attitude. But consider this: Blockbuster probably never saw Netflix coming, and look where that got them.

The new guard of financial companies today have a great opportunity ahead of them, and the consumer should benefit no matter what. But in the end, we believe the companies that develop a copacetic relationship with their customers — a model where both parties benefit — will be the true winners of the new, bankless world.

“I think it’s time for an alternative to banks, that’s for sure.”

When we launched SoFi in 2011, we focused on one particularly broken sector of the banking industry — student loans — though we knew the scope of the problem was much bigger than that. With our student loan refinancing business, we tested the hypothesis that consumers want much more than what traditional banks provide.

From the very beginning, we did things differently — starting with how we approached our borrowers (whom we call members). In the student loan world, people are often given a one-size-fits-all loan, whether it’s from the federal government or a private lender. As former bankers and grad students ourselves, my co-founders and I could see a disconnect between our ambitious peers and their high interest rate loans. They worked hard and were responsible with their finances — and yet the system was telling them they didn’t deserve a better deal than anyone else.

So we set out to right that situation — both in the student loan realm and also as we expanded into other credit products like mortgage and personal loans. Traditional lenders use antiquated, backward-focused methods of evaluating a person’s financial wherewithal, but we look at factors that speak to a borrower’s future potential. A perfect example is the fact that SoFi recently stopped using FICO credit scores to assess our loan applicants. We simply don’t believe that a FICO score tells the whole story.

Bottom line: If you’ve got a promising career and a track record of paying your bills on time, chances are we want to invest in you. And our members love that we see them that way. The enthusiastic feedback we’ve received ranges from requests for “Future SoFi Member” onesies for their kids to creative poems written in our honor. As SoFi advisor and former SEC chairman Arthur Levitt puts it, “I think what makes (SoFi) different is the establishment of a relationship between lender and borrower. The notion of trying to make that connection between a lender and borrower more personal is unheard of.”

“I can’t remember the last time my bank made me smile.”

This idea of identifying the ‘greatness’ in people has remained a core tenet that drives our business today. You may have seen our new television ad where we cleverly point out ‘great’ vs. ‘not great’ people on the street (the ‘great’ people are, of course, played by real SoFi members). While it might be a provocative notion to some, keep in mind that many of our current members would be considered ‘not great’ by the traditional banks out there — banks just use a different method (high interest rates and loan rejections) to tell them so.

I’ve personally spoken to dozens of SoFi members who’ve received the banks’ message loud and clear. One member, a doctor with a solid employment history and $200,000 in student loans, refinanced with SoFi at a rate that was a full two percentage points lower than what other lenders offered her — saving her tens of thousands of dollars on interest. Another, an aspiring first time millennial homeowner, said his bank mortgage approval was contingent upon depositing $75,000 in a savings account with them — and was thrilled to hear we didn’t have the same policy.

We’re confident there are millions of people out there just like them — ambitious, responsible people who don’t want to bank, but would love to SoFi instead.

Betting on our members’ potential has paid off big for us. Our $1 billion financing from Softbank last fall remains one of the largest rounds ever, and an excellent vote of confidence in the opportunity ahead. Investments like this have allowed us to expand our benefits in increasingly valuable ways — for example, soon we’ll be offering free wealth management services to our members and expanding our already popular career services and entrepreneurship programs, helping even more SoFi members land their dream jobs, earn promotions and start successful businesses.

But through it all, the biggest measure of success — our members’ happiness — continues to tell us we’re onto something good.

“I think (banks) are set up for the banks, not for the consumer.”

When people talk about the coming disruption of traditional financial institutions, they tend to focus on a lot of small benefits like lower costs and greater variety of products. Increased competition will certainly drive product innovation, bring down those pesky fees (SoFi, for example, charges no lender fees on most products), and make life easier for consumers.

But from our perspective, that’s simply table stakes for financial companies in this new era. To truly win the hearts and minds of modern consumers, we need to do better than low costs and interesting products. We need to turn the old way of doing things on its head. We need to look at today’s consumers and recognize how they differ from the generations that came before.

Ultimately, I think that’s what our 120,000 members would say we do — we really see them, and better than that we actually want them to succeed. And our products and services reflect that in every way.

Sponsored by SoFi, The Future of Money is a series of stories that explores a world in which banks no longer control our finances. Learn more at SoFi.com.