It's very important to fintech startup SoFi that you understand it's not a bank. So important, in fact, that the company has started a social media campaign around the hashtag #dontbank, and even produced an eerie commercial casting banks as "a giant, made by men, not from flesh and bone, but bricks and mortar."
The hashtag has been pretty successful, generating 1,500 total tweets and reaching about 1.9 million sets of eyeballs on Twitter. And no wonder -- banks still aren't very popular these days. Only 25% of Americans say that bankers have "very high" or "high" trustworthiness (2 percentage points less than journalists!) in a December Gallup poll. Presidential candidates are arguing over who will rein them in the most, and one has pledged to break the biggest ones up. As a pitch for financial services, "we'll be nicer than the mean bankers" is undoubtedly effective. But that doesn't make it true.
SoFi is pretty bank-like, actually
The premise upon which the #dontbank campaign is based -- that SoFi is not a bank and is therefore more responsive and understanding toward customers -- is pretty shaky. In case you're not familiar with it, SoFi started out refinancing student loans, and has since branched out to mortgages and personal loans. Its core functions still mirror those of banks:
- Determining the creditworthiness of borrowers based on their credit history, employment and other factors.
- Processing loan paperwork and originating loans.
- Selling those loans off to investors, without holding them any longer than they have to.
Sure, it's possible that SoFi offers better rates, or is better at determining creditworthiness for a loan than some banks are, or always remembers to say "please" and "thank you" to customers, but they're playing the same game.
And while SoFi is asking you to imagine a "bankless world," that world would be a pretty tough one for SoFi to exist in.
After all, SoFi has turned to banks to help it finance the loans it makes, and its securitizations (converting consumers' loans into investments and selling them off) are typically backed by big-name banks like Morgan Stanley and Goldman Sachs.
What actually makes SoFi different from a bank
The biggest difference between SoFi and a bank is that a bank takes money from depositors, puts it into FDIC-insured accounts, and uses it to fund loans. SoFi doesn't do this. Instead, it takes money from the banks who take money from depositors and uses it to make loans, which is very different because it involves an extra step.
(SoFi doesn't really offer any input on what you should do with your cash or your emergency fund in a world without banks, but we can imagine it might recommend a prepaid debit card or a well-hidden shoebox.)
SoFi has other differences from banks that it wants you to know about:
- A proprietary credit-scoring system that's not FICO.
- Career counseling programs you can apply for.
- Member happy hours in select cities.
It's true that banks are probably missing some lending opportunities by relying so heavily on a single credit-scoring metric, and free drinks for customers is a financial innovation I can get behind. But there's a real danger in believing a company with the exact same incentives and most of the same core functions of a bank is somehow different. SoFi may market itself as your ally against the big banks, but like any for-profit financial institution, it's out to maximize its margins on every loan it makes.
If you actually want to stop dealing with banks altogether, you're better off joining a credit union. They'll still come knocking if you don't pay your loans, but credit unions' not-for-profit, member-owned structure makes them more fundamentally different from banks than SoFi will ever be.
And they take deposits.
What do you think? Do you love or loathe SoFi's #dontbank campaign?
Follow me on Twitter: @claesbell.