Fintech Startup SoFi Took Its First Step towards Traditional Banking. What Is the Plan

Online lender and financial startup SoFi has taken the first step toward competing with the nation’s biggest banks on their home turf: the checking account. Last week, the San Francisco provider of student and personal loans submitted an application for federal deposit insurance, a protection normally only available to conventional banks.

In its application, the company said its SoFi Bank subsidiary will offer bread-and-butter banking products, including checking accounts, debit cards and eventually credit cards.

But no one should expect to see a SoFi branch in their neighborhood any time soon. In its application, SoFi says it believes its all-digital approach – meaning no physical branches – will better serve customers, particularly those who find visits to traditional bank offices unnecessary.

The company, however, will have back-office operations in both Delaware and Salt Lake City, Utah. Like other Silicon Valley fintechs, SoFi has taken advantage of banking laws unique to Utah that allow non-bank companies to set up banking operations under what’s known as an industrial bank charter.

SoFi’s application carries symbolic value as well. Since the financial crisis nearly a decade ago, only a handful of brand new banks have arisen. And no institution has applied for coverage from the FDIC under Utah’s industrial bank laws in 10 years.

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