SoFi, an online tech startup that managed to raise over $2 billion in funding since its inception, withdrew its application for an industrial loan charter. SoFi spokesperson Jim Prosser cited the recent leadership transitions within the company as a primary reason behind the decision according to Reuters.
However, he confirmed the bank charter would remain an option as soon as the time was right for it. It was also asserted that the decision would have no effect on SoFi's plans to offer deposit accounts through partner banks in the near future.
As mentioned, the company was originally interested in the so-called industrial loan charter in order to become an industrial loan company, or industrial bank. Such a charter would allow it to offer banking services such as loans and deposits to consumers; however, it would have excluded SoFi from the supervision of the Federal Reserve.
In other words, SoFi wanted to take a banking license without being supervised as a typical, traditional bank, a move that made politicians take note. Despite these goals, the main priority of the company is to find a new CEO at the moment as well as deal with other public relation issues.
Many top executives left the company within a short time frame, including the Chief Financial Officer Nino Fanlo, Chief Revenue Officer Michael Tannenbaum, and Chief Technology Officer June Ou.
Furthermore, SoFi landed in the nationwide news during the summer following series of sexual harassment allegations and inappropriate public behavior of the senior management, including the now-former CEO Mike Cagney.
Arthur Levitt Jr., the former chairman of the Securities and Exchange Commission, commented in the Financial Times that it was the numerous scandals and the brand damage that had killed SoFi's bank application.
Despite the internal turmoil, the company reported revenue at $134 million in September according to Bloomberg. The adjusted earnings before taxes and interests amounted to $61.6 million and extended to more than $3.1 billion in student and personal loans as well as mortgages. Personal loans brought the highest profit, followed by student loans and mortgages.
SoFi's wealth management unit reported over $12 million in assets in the same time frame. However, it was far below its internal goal of $100 million. The fintech startup started offering wealth management to its existing customers last year and opened the service to the public earlier in 2017.
Known for its aggressive market strategy, SoFi focuses on millennials that graduate from top-tier universities, offering its 350,000 + members a wide range of products.
SoFi started off only as one of the best student loan consolidation companies but eventually started offering other services ranging from insurance and mortgages to wealth management. During its last funding round, the company was valued at $4 billion.