SoFi: The Financial Future for Gen Z & Millennials
By Anjali Barnabas (CC’ 24, Analyst 2020–2021)
SoFi, short for Social Finance, is the new fintech unicorn on the block. Valued at $4.8 billion, the personal finance company is looking to capitalize on millennials’ and Gen Z’s growing demand for financial services. The company has raised $2.3 billion in funding and is currently in talks with a number of special-purpose acquisition companies (SPACs) who want to take the company public next year, hoping to take advantage of both the growth in consumer demand and the bullish stock market. But with the plethora of fintech companies offering easy access to financial products and services, why should young people pay attention to SoFI?
While SoFi initially launched in 2011 as a student loan financing company targeting millennials, it quickly expanded to personal and mortgage loans, refinancing, and wealth management services. Additionally, it also allows users to invest their money in stocks, ETFs, and a fractional share trading product called Stock Bits. Recently, SoFi acquired Galileo, a payments software company, to capitalize on the mobile financial services market which is expected to grow 70% by 2024. To date, SoFi has approximately 1 million members and has made $45 billion in loans. Furthermore, in response to the current pandemic, they launched a small business lending program through Lantern, SoFi’s loan comparison tool, to fund over $50 million in loans.
SoFi’s key differentiator is its emphasis on financial education, and the ease and simplicity of its user experience. It resonates with students and young people entering the job market who want to invest, but don’t know where to get started. The volume of information and misinformation available nowadays can be overwhelming for many millennials and Gen Z individuals. SoFi addresses this by being a source of verified information, offering free financial advice with a certified financial planner, as well as personalized webinars, articles, etc. Their guidance during the COVID-19 crisis has been especially helpful to those who have been affected. SoFi’s simple user interface is also appealing to many first-time investors looking to participate in the public markets but don’t need the technical tools of many higher-end investment platforms. The confluence of these two factors has helped it capture an ever-larger market share. Since January, SoFi has seen a 150 percent increase in account openings, many of whom are Gen Zs and millennials looking to diversify their revenue streams through long-term passive investments.
An integral aspect of SoFi’s appeal is also its social mission. SoFi has publicly committed to fighting racism and is standing in solidarity with all communities, providing space for open dialogue. Unlike other companies, they are putting money where their mouth is, and have donated a million dollars to organizations that empower people of color. In addition to targeted efforts, SoFi’s overarching vision of increasing the accessibility of financial services and knowledge to a younger demographic addresses the anxieties and concerns of many people in my generation coming into adulthood. The impact of the Great Recession has left lasting scars on the financial well-being of America’s youth. Millennials as a cohort will be the first generation in history that will be poorer than their parents. And to add salt to a wound, the effects of the pandemic, which have yet to be fully realized, will almost certainly have negative repercussions to the economic prospects of millions of millennials and Gen Z individuals.
CEO Anthony Noto wants SoFi to become the central hub for members to manage and grow their wealth. After listening to him speak on an AXIOS webinar about the financial futures of millennials, it was clear to me he is committed to making younger generations financially literate, which is essential as we transition into a digital era of personal finance. Furthermore, his background as a leader in both finance and technology, being the COO/CFO of Twitter and Co-Head of Global Telecommunications, Media and Technology (TMT) Investment Banking at Goldman Sachs, has provided him with the necessary expertise to tackle the ever-growing fintech sector. Seeing his passion for democratising financial services first-hand has convinced me that SoFi will become the de facto personal financial service provider for our generation, aiding people like me, who are in the beginning phases of adult life — whether it’s college or a first job — manage their finances.
