It is a truism that we need bank like services but we really don’t need banks. The portfolio of services offered by a traditional analog bank sometimes feel cobbled together. Difficult to manage and expensive to use. Current accounts is an excellent example. For some insidious reason, banks tend to charge consumers silly fees to lend out their money. Most consumers just accept it because that’s just the way it is. But innovative Fintechs are changing this paradigm.
This week, SoFi announced they have just invited the first members off the waitlist for SoFi Money – their spin on providing a blended checking and savings account. The bank like service was revealed earlier this year.
SoFi’s research, as posted on their blog, uncovered the following frustrations that consumers have with traditional banks:
- They hate fees. Who wants to pay $12 to maintain a checking account?
- The technology is lame. It certainly doesn’t live up to other online experiences, like Amazon or Instagram. Why should you have a separate log-in at the same bank to manage your checking account and your mortgage
- Banks make (way) more off people’s money than they do. Why are we left to accept an average 0.05% APY on a checking account in a rising rate environment?
Sounds pretty straight forward to me. Banks suck. But then they need to charge stupid fees and payout interest rates that are negative in real terms to be able to pay for all those brick and mortar locations and all of the VPs hanging out at HQ.
So what is SoFi offering that is better?
SoFi says their mobile first approach, that combines checking and savings, eliminates the fees but provides improved services. They are taking a hybrid approach so if you really need to you may speak to a living person instead of a bot – including financial planning services. The interest rate they are paying (today) is 1.10% – a big leap from the 0.05% previously mentioned. And, of course, they hope that if you use their current account feature you may consider some of their other financial services.
SoFi believes the digital banking space is going to get crowded – and they are correct. Marcus by Goldman Sachs is pushing forward and Revolut from the UK should cross the Atlantic any day now. There are more challenger banking operations in the queue. SoFi believes traditional banks will remain in the lead for the near future but Fintech competition will force them to improve their services. And if traditional banks don’t up their game, it makes selecting an option like SoFi Money so much easier.