SoFi Technologies (SOFI +4.32%) has comfortably outperformed the S&P 500 this year, and the fintech company's recent push into crypto got plenty of attention from investors.
Earlier this month, SoFi became the first and only nationally chartered bank to launch crypto trading. SoFi customers can now trade dozens of cryptocurrencies right from the platform.
SoFi CEO Anthony Noto told investors in the November announcement that he believes blockchain technology will fundamentally change "EVERY way finance is done throughout the world."
That's a big statement from one of the smartest people in fintech, and crypto could wind up being a big win for SoFi.
NASDAQ: SOFI
Key Data Points
Assessing SoFi's fintech peers
Image source: Getty Images.
SoFi is the latest fintech company to enable crypto trading, but investors can look at other financial companies like Robinhood Markets (HOOD +0.23%) and Coinbase Global (COIN +2.96%) to gauge how crypto can impact SoFi.
Robinhood is the better example since it has a wider range of financial products and services, while Coinbase focuses heavily on crypto. It's a critical part of Robinhood's business that is a part of its "transactions-based revenue." Robinhood's third-quarter total crypto revenue increased by over 300% year over year, making it the company's fastest-growing segment.
Robinhood doesn't give net income breakdowns for each category, but overall profits and average revenue per user increased by 271% and 82% year over year, respectively. It's reasonable to assume that crypto revenue played a key role in those growth rates.
Coinbase delivered 82.8% year-over-year transaction revenue growth in Q3, reaching $1.05 billion for that part of the business. Consumer and institutional transaction revenue both grew significantly.
SoFi's crypto adoption isn't new
Robinhood's and Coinbase's rising crypto transaction revenue demonstrate that SoFi is capitalizing on a compelling opportunity. However, this isn't the first time SoFi has let its customers trade crypto.
The fintech opened up crypto trading to its customers in 2019 and only discontinued in 2023 due to chartered bank regulations. SoFi rolled its crypto offering into SoFi Invest for reporting purposes and even offered free cryptocurrency transactions to boost demand.
SoFi Invest revenue increased by 112% year over year in Q2 2022, back when crypto was a key part of the business. SoFi didn't disclose crypto transaction numbers like Robinhood, but those transactions played a role in SoFi Invest's high growth rates.
SoFi Invest revenue was up by 22% year over year in Q1 2023. Then, revenue from that segment only went up by 1% year over year in Q1 2024. That was the first full quarter SoFi had removed crypto trading from its platform.
SoFi is bringing back crypto at a time when it has become more popular and accepted by retail investors and financial institutions alike.
Crypto is free money for SoFi
SoFi isn't reinventing the wheel or doing anything innovative with its crypto offering. The fintech company is tapping into a revenue stream that worked in the past. SoFi only had to discontinue crypto trading on its platform due to the regulatory pressure of becoming a chartered bank.
Letting people buy and sell crypto should bring back customers who left SoFi in favor of fintech apps that kept their crypto trading features intact. A resurgence of crypto activity on SoFi can also boost demand for equity and options transactions.
Robinhood was able to boost its average revenue per user by 82% year over year. If SoFi can do something similar, the digital bank's revenue can soar in future quarters. The fintech company also faces easy year-over-year comparables since the previous quarters didn't include crypto transactions.
It's no surprise that SoFi is betting big on crypto now that banking regulations have eased. With Bitcoin (BTC 1.02%) down this year, SoFi may have reentered the crypto industry at the right time. If cryptocurrencies go on another big rally, transaction revenue and volume should increase significantly.
