Online lending firm SoFi announced today that it has acquired Zenbanx, a startup that offers banking, debit, payments and money transfer services to users online and through a mobile app.
The combination of the two will allow SoFi to move deeper into the financial lives of its customers. While today it focuses on student-loan refinancing, mortgages and personal loans, integrating Zenbanx will allow it to provide an alternative to the traditional checking and deposit services most of SoFi’s customers today get from banks like Bank of America, Citi or Chase.
Zenbanx offers a variety of banking services, including savings and debit, money transfer and bill payment, and the ability to deposit or hold money in up to nine currencies. The company was founded by Arkadi Kuhlmann, who previously served as CEO of online bank ING Direct, which was acquired by Capital One in 2011.
The deal shows how SoFi is thinking about new ways to get customers hooked on its services. The company has explored the possibility of applying for its own banking charter, according to The Wall Street Journal, and a source tells TechCrunch the company explored the acquisition of a credit-card startup last year.
Terms of the deal were not disclosed, but The Wall Street Journal has pegged the price of the acquisition as nearly $100 million in an all-stock deal. That’s consistent with the price BBVA paid for online banking startup Simple back in 2014, and marks a significant investment for SoFi, which is still private but has raised more than $1 billion in private funding.
It also shows how strategically important SoFi believes banking will be to the future of its business. The problem faced by SoFi — and for any company looking to get into the consumer banking space — is that new bank charters are tough to come by due to heavy regulation in the banking industry. While more than 100 new bank charters were formed each year on average from 1990 to 2008, just seven were formed from 2008 to 2013 in the wake of the financial crisis.
As a result, most startups in the banking space end up partnering with regional and community banks that are digitally savvy and looking for new ways to boost deposits and assets under management. That process can take a long time to complete, however.
With this acquisition, SoFi won’t have to go through the headache of finding a banking partner and integrating with their services, as Zenbanx already has a partnership with WSFS Financial Corp. In addition to being a partner, WSFS was also a small strategic investor in Zenbanx — which means it will now also hold a (very small) stake in SoFi.
The hope is that SoFi will be able to leverage its existing user base and marketing muscle to get people signed up for banking services, something most new banking startups struggle with. And by offering banking on top of its loan and financing offerings, it will have a deeper — and stickier — relationship with users.
SoFi’s investors include SoftBank, Third Point Ventures, Wellington Management, Institutional Venture Partners (IVP), Renren, Baseline Ventures and DCM Ventures.
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