SoFi (Social Finance)

Product Model

SoFi originally utilised a matchmaking business model that linked wealthy university alumni with recent graduates looking to refinance their student loans. The company only offered loans to graduates from top tier or Ivy League universities and found wealthy alumni from these universities who were interested in loaning money to these individuals. However, the business struggled to scale with this model so shifted to offering loan refinancing itself, adding other products as the company grew. Therefore, its main business model now is a product business model.

SoFi has maintained its focus on exclusivity and now offers a range of financial products to a consumer set it terms ‘HENRYs’ – high earner not rich yet. SoFi is still strict on whom it offers its products to and an individual’s eligibility is determined by: career experience, income vs. expenses, financial history and education. The company no longer uses credit scores (FICO scores) from any of the US’s credit bureaus to determine the credit worthiness of individuals, stopping in early 2016. This is a key distinguisher as traditional financial institutions rely heavily on these scores for their lending.

SoFi can therefore be described as using a product business model. The company sells financial products including: student loan refinancing, mortgages, personal loans and wealth management services. In addition it offers its customers, termed members, a variety of additional services including career counseling and unemployment protection.

SoFi does not take deposits and finances its loans through venture capital, bond issues via securitization and debt financing. In 2016 the company formed its own hedge fund to purchase the loans it issues.


Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady, who met while students at Stanford School of Business, founded SoFi in 2011. The company originally focused on matching alumni of top ranking US universities with recent graduates looking to refinance their student loans. The company moved away from this business model as it began to expand but remained focused on high worth or potential high worth individuals. The company has raised $1.4billion in funding, with the most recent Series E funding raising $1billion.


SoFi’s customers are individuals looking to refinance student loans, access mortgages, secure personal loans or use wealth management services. SoFi only accepts customers it deems to have potential to become high earners or who already are. This model of assessing risk allows SoFi to offer better rates than mainstream banks that evaluate risk using more traditional methods including FICO credit scores. The primary market appears to be highly educated young professionals.


SoFi generates value for its customers by providing loan and finance products at better rates than those available to the general population. It can do this, as the risk of its customers defaulting is deemed lower than the average borrower.


Customers access SoFi’s products and services via their website. Customers must enter personal information detailing their educational background, job and financial history along with information on their expenses and other debt obligations.


SoFi utilises venture capital, bond issues via securitization and debt financing to finance the loans it makes. This model could present issues for further growth as continual investment is needed to finance new loans. SoFi charges

a 0% annual fee for its wealth management services to customers of its loan products and fees of less than 2% for regular customers. The company’s various loans are available for rates between 3% and 12%. SoFi does not disclose its revenue but insists that it is profitable.



Written by Thomas Murray under the direction of Prof Charles Baden-Fuller, Cass Business School, in September 2016. This case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. © 2016

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