SoFi is a fintech business currently using a product business model to sell financial products including student loan refinancing, mortgages, personal loans and wealth management services, as well as offering career counseling and unemployment protection to its customers.

Originally, SoFi utilized 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. However, the business struggled to scale with this model so shifted to offering loan refinancing itself, adding other products as the company grew–implementing a product business model as its core business.

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, professional history and education in addition to a financial history of responsible bill payment to evaluate its borrowers.

The company no longer uses credit scores (FICO scores) from any of the US’s credit bureaus to determine the creditworthiness of individuals, stopping in early 2016. This is a key distinguisher as traditional financial institutions rely heavily on these scores for their lending.

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.

SoFi first attained unicorn status (i.e. startup companies that had succeeded in growing and attracting international investments–worth $1 billion or more) in February 2015; later that year, it raised $1 billion at a $3.6 billion valuation. The fintech company currently has 250,000 members and originates 1$ billion credit per month. In 2019, the Investment Authority valuing SoFi at $4.3 billion. The company is looking to go public.


SoFi has one customer group: individuals looking to refinance student loans, access mortgages, secure personal loans or use wealth management services. SoFi only accepts customers it deems to have the 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.

Learn more about the Product Business Model

A dyadic transactional relationship where your good or service can be designed and delivered without prior interactions with the customer.

Engagement  — Value Creation Proposition
SoFi provides loans 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.

How SoFi creates value for customers:

-save more money on student loans with exclusive rate discount reduction;

-find pre-qualified rates in short time, with a fully mobile application;

-get access, at no additional cost, to exclusive member benefits like once-in-a-lifetime experiences, financial advice from credentialed financial partners, perk discounts and more.

Delivery — Value Chain
How SoFi works for customers: individuals have access to SoFi’s products and services via their website. They must enter personal information detailing their educational background, job, and financial history along with information on their expenses and other debt obligations. SoFi has a highly rated mobile app with a spending tracker.

Monetisation — Value Capture

SoFi makes money due to high-interest rates and no monthly or overdraft fees. There’s no free ATM network, but SoFi reimburses many third-party ATM fees and doesn’t charge its own.

SoFi utilizes venture capital, bond issues via securitization and debt financing to finance the loans it makes. This model could present issues for further growth as a 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%.

Digital Technology
SoFi uses technology to leverage customer data and personalize lending, enabling them to offer lower rates and savings for customers. SoFi uses AI to create an underwriting model that examines free cash flow, professional history, and education in addition to a history of responsible bill payment to evaluate its borrowers and to increase customer engagement. This means that in the future, the company’s business model may change to “solution”.



Disclaimer — Written by Thomas Murray under the direction of Prof Charles Baden-Fuller, Cass Business School in 2016. Revised and updated by Francesca Hueller under the direction of Prof Charles Baden-Fuller, in 2019. 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. The information contained here should not be used for investment advice and is simply indicates the individual’s understanding of the company’s business models as of November 2019. © 2019