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.