What happened
The stock market was having a generally strong day on Wednesday, with all three major indexes in positive territory, but fintech company SoFi Technologies (SOFI 0.26%) was a big outperformer. As of 10 a.m. ET, SoFi had spiked higher by more than 12% after rising as much as 19% earlier in the day.
So what
Today's upward momentum has nothing to do with SoFi's earnings. We won't see those for another couple of weeks.
Image source: Getty Images.
However, SoFi got some excellent news from regulators. It received approval from the Office of the Comptroller of the Currency as well as from the Federal Reserve to officially become a bank. This stems from the company's pending acquisition of California-based Golden Pacific Bancorp, which it planned to use as its SoFi Bank subsidiary.
Now what
Becoming a bank could have some big implications for SoFi's business growth and profitability. For one thing, SoFi currently relies on partner banks to hold customer deposits and make loans. As a bank, SoFi can hold deposits and fund loans itself -- not only does this allow SoFi to earn more interest income, but it also makes it easier to offer more competitive interest rates to customers to win more business.
Becoming a bank should also allow SoFi to offer a broader variety of financial products and services to its customers, giving it more abilities to cross-sell to its highly loyal and satisfied customer base.
The bottom line is that as a bank, SoFi's growth and earnings potential are much greater than as a nonbank fintech disruptor. Its acquisition of Golden Pacific is expected to close within the next month or so, and it will be very interesting to watch as the next step in SoFi's evolution unfolds.
