Shares of SoFi Technologies (SOFI 2.71%) jumped out of the gate Wednesday, surging as much as 8.3%. As of 12:17 p.m. ET today, the stock was up 3%.
The catalyst driving shares of the digital financial-services provider higher were steps the company is taking to provide members with increased federal insurance on bank accounts.
SoFi announced in a press release today that its checking and savings customers would be able to protect their accounts beyond the standard $250,000 coverage from the Federal Deposit Insurance Corporation (FDIC). They will be able to protect deposits of up to $2 million for new accounts, an offer that will be extended to existing customers over the next week.
A newly created partnership with a number of other financial institutions allows the company to spread its deposits among various accounts of member banks, allowing SoFi customers to seamlessly opt in for higher coverage.
In the past, banking customers were forced to monitor their balances and move funds to another bank if the total deposits exceeded the $250,000 threshold. By partnering with other member banks, SoFi has moved the process in-house, taking the burden off its customers.
The recent failures of Silicon Valley Bank and Signature Bank have stoked anxiety about smaller financial institutions, as consumers fear that their account balances might not be sufficiently covered by the existing level of FDIC protection.
Fears pervading the industry have conspired to drag down SoFi, which saw its stock drop as much as 22% since earlier this month. It's still down 78% from its peak. This latest move should assure customers that larger account balances can be brought under the FDIC umbrella.
Furthermore, CEO Anthony Noto has signaled his confidence in the company by buying roughly $1.24 million of SoFi stock during March alone. There are plenty of reasons to sell stock, but only one reason to buy it, suggesting the chief executive thinks it's a good value.
Investors with time and the patience to withstand the current volatility would do well to follow his example.