Can this Fintech disrupt the legacy banking system?

June 16, 2024
Wiko Steyn
Wiko Steyn

Unicorn Portfolio Update 13: #16 of 20 stocks added.


SoFi Technologies has established itself as a retail investor favourite, which usually raises a red flag for us. Luckily we have our process to determine if a company deserves a spot in our portfolio, so lets run this one-stop shop for all things financial through our Unicorn scorecard.

SoFi can be best described as an operator and provider of digital financial services. The company is based on three pillars: Lending, Financial Services and Technology. The Lending arm is the legacy part of the business and provides services like personal loans, home loans and student loan refinancing. 

SoFi's Financial Services segment operates like a typical bank with savings, spending, borrowing, protection and investing-related services. 

The Technology side is certainly the most exciting part and is rooted in the operation of their API (Application Programming Interface) platform Galileo. We will expand on this platform in the next section.


Opportunity = Conviction (8/10)  X  Upside Potential (8/10)  

We believe the next decade will be a golden era for digital financial services,where three to five FinTech companies will emerge as leaders, and one will emerge as a Winner Takes Most, and we believe that will be SoFi. -Anthony Noto

This quote from SoFi's CEO neatly summarises the upside potential.

Recent statistics indicate that more than 50% of Americans are cheating on their bank by having one or more accounts from other banks. Reasons for owning more than one active account at multiple banks include flexibility, products offered, fees and security. SoFi aims to bring a solution to this highly fragmented market. Since its inception, SoFi has focused on differentiating itself from their competitors by offering a complete suite of digital products that cater to all their customers' financial needs. SoFi is focussing on four key factors:

Speed: SoFi is set on becoming the go-to bank for fast service. From opening an account to a loan application or buying and selling a stock, SoFi prioritises speed.

Selection: SoFi already has a whole roster of product offerings and they are not slowing down with new additions, which ultimately create an all-in-one platform for their customers.

Content: Distributing financial knowledge is one of SoFis core values. SoFi directs considerable effort at developing valuable educational content and tools that customers can use to improve their financial wellbeing. To incentivise their customers, the company uses a rewards system for reaching content completion milestones. 

Convenience: A bank should strive to be as painless as possible and like most tech companies, user experience is a primary focus of all of SoFi's offerings.  

In April 2020, SoFi announced that they successfully acquired Galileo Financial Technologies

Galileo themselves can best describe what their platform is capable of.

Galileo, the API standard for card issuing, virtual card solutions and digital banking, is a global payments platform that powers world-leading fintechs, challenger banks, neobanks, financial services and investment firms by removing the complexity from payments. Galileo makes it fast and easy for many types and sizes of businesses to innovate and deliver amazing financial services user experiences to their customers through our Galileo Pro and Galileo Instant Solutions. 

This platform certainly creates a unique value proposition. In essence, Galileo offers fintech companies or neobanks the backbone to build their products on.  The in-house development of a platform like this has tremendous costs associated with it and that is why companies like Robinhood, Bitpay, Shipt, Revolut, Wise and many more opt to make use of Galileo.

Moat (6/10)

SoFi's business model inherently creates a massive network effect, due to their diverse bouquet of services which they can cross-sell and upsell.

Galileo is probably their main competitive advantage, and the key to powering SoFi's growth, profitability and long-term competitive position. Its unit economics will be hard to beat by companies that compete with SoFi and also those that make use of Galileo.

We believe our vertical integration of tech and operations, via our lending stack, and now the Galileo technology platform, coupled with the revenue and marketing efficiencies of cross-buying, will drive attractive unit economics that will be hard to beat. -Anthony Noto.


Management (9/10)

Tier-1 management team with a visionary CEO. Anthony Noto is the former COO of Twitter, CFO of the NFL and previous partner at Goldman Sachs. The company also has a very strong board of directors with a wealth of experience in technology and financial services. Insiders still own more than 10% of the company and we love to see this amount of skin in the game.


Financials (5/10)

  • SoFi delivered another good quarter, especially considering the macro headwinds.
  • Rapidly growing but still unprofitable and margins leave a lot to be desired.
  • SoFi's financials are extremely complicated and convoluted.
  • The balance sheet is loaded with debt but this is quite normal for a bank.

Risk (5/10)

  • Competition
  • Student Loan Policy
  • Dilution
  • SoFi is often regarded as a meme stock which introduces volatility

A couple of important questions to consider for potential investors:

  • Are SoFi's offerings truly unique and how strong is their competitive advantage?
  • Should SoFi be valued as a tech company or a bank?



SoFi's goal is to disrupt the highly fragmented legacy banking market by providing customers with all their financial needs on a single platform with an attractive UI and intuitive UX. Galileo is their greatest advantage and we believe their excellent management team can leverage it to take advantage of the rise of digital banks. The company did not score quite as high as we would like with a score of 69 but due to the strong management team and massive opportunity, we are going to give them a shot. Disruptive technology companies allow regular people to invest in our dream of the future. Being part of the transformative ambitions of these companies makes the wild ride worth it for passionate investors like ourselves and so does the potential upside.


Portfolio Updates Summary

  • Buy $250 SoFi at $6.06



This is not financial advice and is only based on the author's opinion. This is not buy or sell recommendations of any stock.  The $10K is not real money and only a demonstration of a typical portfolio. The Unicorn Portfolio is a high-risk portfolio and should always remain a small allocation of your overall assets. This is an actively managed portfolio where we will buy and sell positions as we deem fit without any regard for taxation. Remember, all selling of stocks triggers a tax event in most countries and it is the investors personal responsibility to always remain tax compliant


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