SoFi, the fintech giant is going through a transformation investors dream of. The student loan company turned financial super app shot up 11% yesterday after receiving a buy rating from Jefferies analyst John Hecht.

SoFi is one of the many companies disrupting the age-old banking industry — one that’s been way too comfortable for centuries. If they don’t keep up, they might be robbed of their futures.

SoFi’s background check: Dark past, bright future

SoFi started as an affordable student loan business before expanding into mortgages, loans, investing, etc — quickly becoming one of the most highly valued US fintech startups. But its culture needed work…

• SoFi made headlines in 2017 from allegations its female employees were treated improperly.
• Days later, its CEO resigned over the sexual harassment claims — unveiling a company plagued by a toxic culture.

In 2018, SoFi settled claims of inflating the amounts borrowers would save by refinancing. Under new leadership, SoFi expanded its business divisions before going public via SPAC this year.

After a rollercoaster year for the stock, soaring 250% after going public but falling 40% shortly after, the company is back in the spotlight — this time, for the right reasons.

Bank robbers coming in the form of fintechs

Last year, SoFi received conditional approval to become a bank. If approved, a banking license would be huge for the company, letting it…

• Set its own interest rates and remove limits on the number of mortgages it can issue.
• Issue new products it couldn’t before e.g. checking accounts.

Meaning: A banking license would give SoFi more flexibility, higher profit margins and the ability to expand into new products.

To fast-track its banking license, SoFi acquired Golden Pacific Bancorp — becoming the latest fintech to enter banking this year.

• Lending Club (NYSE:LC) became the first fintech company to acquire a bank in February, and Square (NYSE:SQ) launched its own bank arm in March.
• Acquiring a bank allows these companies to leapfrog hurdles in the highly regulated banking industry.

Investors: SoFi arms itself

In 2020, SoFi acquired Galileo, a fintech providing banking and payments tech to customers like Robinhood, TransferWise and Chime. This was an important purchase as it gave SoFi:

• Sales diversification beyond retail customers, into business customers.
• Access to another fast-growth business with a massive market size — and a strong global customer base.

Once it receives a banking license to pair with its acquisition, SoFi will have the ingredients to achieve years of growth. Now, it’s up to the company to execute.