“We want to understand the full financial, education, and employment context. We’re looking at what their degree type was, we’re looking at what school they went to, we’re looking at how long they’ve been working.
“Most of our clients have a fairly significant amount of savings. They might keep this in cash in bank accounts, retirement, investment accounts. When people come to us with increased levels of savings they’re able to get better rates.”
For these MBA-launched fin-tech firms, which engage and service clients via the Internet, and mix their software engineers and data analysts across all their operations, the next step is underway: creating new financial services products to offer to their student debt refinancing clients, to keep them as customers for life.
MORE AND MORE FINANCIAL SERVICES PRODUCTS ON THE WAY
“You’ll see companies like Earnest and SoFi really expand what they’re doing and expand their relationships with people and be able to offer a wide suite of products,” Earnest’s Beryl says. “We’re looking at the holistic life of our borrowers, not just student loans. but some of those innovations will be in student loans.”
Beryl says Earnest, which also issues personal loans, will announce new financial services products this year, but would not reveal what they will be. He has called Earnest “the consumer bank of the future.”
SoFi, on top of its refinancing business, has added mortgages and mortgage refinancing, personal loans, and MBA-program loans. The company’s recent growth has been stunning. SoFi began 2015 with about $1.5 billion in total lending – then lent out $4.5 billion in 2015. “We expect to do multiples in 2016,” says SoFi co-founder and VP of Community & Member Success Dan Macklin. The added financial services have paid off – of the $900 million lent in December 2015, the bulk of it was not for student debt, Macklin says. The firm’s MBA-program loans are more restricted in scope than its general refinancing, with loans issued only to students at the couple of dozen top schools.
SECURING CUSTOMERS FOR LIFE
More products are on the way this year, Macklin says. SoFi in September 2015 announced $1 billion in funding. “There will be a fourth product, and a fifth product, and maybe a sixth or seventh product this year,” Macklin says. “That’s what we’re using the money for.” Macklin would not reveal a laundry list of innovations, but said an investment product is coming, and also that, “We’re looking at insurance, and we’re looking at transaction accounts, and ultimately any financial product or any financial transaction.” SoFi now has 525 employees, many of them added in 2015.
CommonBond, too, is intent on capturing customers for life. Within the year, the firm will launch personal loan, credit card, and mortgage products, says founder/CEO David Klein, a 2012 Wharton MBA. Klein points out that the company’s customers are ideal financial services clients. “They’re a really good credit risk,” Klein says, noting that clients’ typical FICO credit score is upward of 750. “They have a lot of financial life ahead of them. They will have financial needs that will continue to evolve with them.
“You have a suite of products and services that our borrowers and customers will continue to need and we want to be positioned, and we believe we are well positioned, to provide them with those products and services. We started with student loans but we’ve always had grander ambitions.”