Here's Why SoFi Has So Much Potential

There are fintech disruptors that have taken significant market share in areas like personal lending, savings accounts, and even brokerage. But there's one thing SoFi, which is set to go public through a SPAC merger with Social Capital Hedosophia Holdings V (IPOE), does differently. In this Fool Live video clip, recorded on April 12, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss why SoFi has so much potential.

Jason Moser: Question here regarding SoFi. SoFi is down a lot, what do you think about that fintech?

Matt Frankel: I really didn't notice it was down a lot because I plan to hold it for a long time. I know it pulled back a little bit and I may end up adding some shares to it. I like SoFi it's kind of disruptive potential. It's like Jamie Dimon said, they are a fintech disruptor. SoFi got a bank charter, they just acquired a bank. They're not totally a fintech anymore. They're not a shadow bank anymore as he refers to them. But they still have a lot of fintech advantages going for them like lower cost. They have a branch network, for example. I call it more like an online bank than a pure fintech at this point, but they have such potential to develop their community. We've talked about that in the last year. That's how they see themselves. It's like a community of finance, not just a trading app or a lender or a credit card issuer. They have all those things. But they see themselves as a fintech community, the way banks used to be, say, 30-40 years ago. Your bank was like a community. You'd walk in, people would know your name. That was even before my time when this kind of stuff happened, but that's how SoFi sees themselves is bringing that back but in a more tech-friendly way.

Moser: Yeah. I mean, I remember that. I remember those days growing up. I've got a few years on you. I definitely remember that community bank vibe, that was the learning experience, right? My mom took me to the bank to open that savings account. They all knew who you are and you got a lollipop when you went into the bank and that was just a different world. Now, I mean, pretty much trying to do whatever it can.

Frankel: I mean, if you needed an auto loan, someone would sit down at a desk with you and explain your options, not necessarily sell you, but it would make a meeting out of it.

Moser: I mean, it wasn't even that long ago that existed. When I worked at Bank of America and I was a loan officer there, that was like 2001, 2002, 2003. Even then, that was very common. I mean, folks would come into the banking center and sit down at a desk with me and I would go through their options as far as refinancing or small business loan or car loan. I mean, it was a very interpersonal transaction there and that really just doesn't seem to be the case anymore.

Frankel: No, that exists somewhat like the personal. I can walk into Wells Fargo and try to open a new safe deposit box, for example.

Moser: Yeah.

Frankel: Last time I did that, I was there for five minutes before the guy tried to sell me a credit card. It doesn't feel like the relationship aspect, it feels more like a sales pitch.

Moser: Well, but that's what that job is. I will say like from having the job, that is that job is the incentives. You get your salary and then typically there is like a quarterly bonus based on hitting all of these various metrics and their roles here.

Frankel: Not at Wells Fargo anymore.

Moser: They all had it. Bank of America was the same way. Frankly, I think Wells Fargo just was the one that really got out there and it made the most headlines about it. But like Munger says, beware of the power of incentives. When you're telling someone that their paycheck is going to be dependent on how many credit cards or accounts they open, that's going to dictate a lot of what they do.

Frankel: The bigger point is that the younger generations don't want to do that. The younger generations don't want to sit and spend an hour with a banker in a branch. There is other things they could be doing.

Moser: The older generations don't either speaking for the older generation, I don't want to do it either, all right? I embrace tech in the financial world.

Frankel: My parents still go and sit and talk to their banker and stuff like that. You're not in their generation.

Moser: No, not quite. Not quite.

Frankel: But the younger people don't want to do this. SoFi is trying to recreate that community bank vibe through the internet where people don't have to spend a ton of time doing it. I think they are the only ones really doing the community vibe-type thing. Robinhood is a community of traders. There's some lending communities like Square is a community of small business moving money around. It's not a full encompassing bank ecosystem. They don't offer high-yield savings products, for example. They don't offer the Square credit card, at least not yet. SoFi really does a lot of different things. They don't try to coach you through your financial life the way SoFi is doing. SoFi is really doing a great job of creating that community vibe. I am a big fan of SoFi. I think that stock will prove to be very cheap if they're successful in really building that out. It's not a sure thing yet, but they have a ton of revenue. They are a big company already. I think the acquisition of a bank will only really add to that.